Important contribution of private investment in the development of the country

- Almost every form of production and employment is largely created in the private sector

Private investment has a very important contribution to India's development. However, private investment performance has been poor for a long time. This decline reached a new low in 2021 and recent evidence points to a recovery. It is an important start. Almost every type of production and employment is created in the private sector. Every step taken by the State Government should be seen as a step to encourage investment by the private sector. Based on this basic understanding, public policy is not an area in which the power of the economy can be demonstrated. The financial system should also increasingly be seen as a sector that creates the environment for non-financial firms to participate in the creation of the economy. Both policy and finance are the means by which dynamic growth in production and employment can be achieved and this can be done with the help of non-financial firms.

Small companies are not monitored in India but big companies are concerned. A good way to measure investment activity is to measure annual growth in gross fixed assets of large non-financial firms. This is the annual figure of investment flows of large companies. Accordingly, two periods of rapid growth appear. First in the mid-1990s and then in the late 2000s. Growth in gross fixed assets has declined from around 25 per cent in 2007-08 to almost zero per cent in 2021-22.

The CMIE CAPEX database tracks all types of investment projects. The database has been in practice since 1995 and maintains a good record of investment activities in India. Only those projects with a specific name appearing in the company's various advertisements appear in the database.

This figure is of great concern to observers tracking projects in our country as it has been steadily declining since 2011-12. Now things have changed. It reached its lowest level in 2020 and was valued at around Rs 47 lakh crore in today's currency. It started a slow recovery from 2020 and made rapid progress in early 2023. The latest valuation is Rs. 55 lakh crore, which is 17 percent more than the floor level. A long downtrend has been reversed.

A shock to the expenditure sector, such as a surge in private investment flows, can affect the economy. Along with the increase in purchases and employment, there is also an increase in demand. Everyone who sees that his friends or relatives are getting employment, interprets it only as an improvement in the distressed condition. This creates many positive reactions. For example, increase in credit, increase in purchase of durable goods, more investment in business schemes etc. are examples. So far we have examined the economy as a whole. Underneath all this lies a vast inequality. This is because some companies are doing well and some are doing poorly. Many companies and business leaders are alarmed by what has happened over the past decade.