India: Why are private firms not investing despite record profits?

Weak domestic consumption and muted export demand are restricting expansion plans, according to a report.

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It's a question that's confounded policymakers for years. As a share of gross domestic product (GDP), private investment in India has been on the decline since the global financial crisis of 2007, even while the overall economy clocked world-beating growth rates.

After a long hiatus, the investment rate picked up slightly in 2022 and 2023, but latest data from a leading ratings agency shows private sector expenditure as part of the overall investments in India's economy dipped again to a decadal low of 33% this financial year.

Analysis from Icra of 4,500 listed companies and 8,000 unlisted companies reveals that while the pace of investments made by listed players moderated, those by unlisted entities actually contracted.

Over the years, several economists have raised similar concerns about a slowdown in private investments.

https://www.bbc.com/news/articles/c5y9n4n491po

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