Private sector gross fixed capital formation (GCFC) in machinery and equipment and intellectual property products has grown cumulatively by just 35% in the four years through fiscal 2022-23. But its GFCF in “dwellings, other buildings and structures” increased by 105% during the period, it said.
“This is not a healthy mix,” chief economic adviser V Anantha Nageswaran wrote in the preface to the Survey.
A laggard approach by India Inc in these segments is the reason why there is a smaller number of higher-quality formal jobs than otherwise, the survey pointed out.
A slow pace of investment in these segments will delay India’s quest to raise the manufacturing share of gross domestic product, it said.
“The government economists may be concerned since multiple policy interventions such as production-linked incentives (PLI) to boost local manufacturing have not yielded optimum results,” said NR Bhanumurthy, a professor at the National Institute of Public Finance and Policy.
The Economic Survey estimates that the Indian economy needs to generate nearly 78.51 lakh jobs annually in the non-farm sector to cater to the rising workforce.
However, to create these many jobs, there is a need to provide the conditions for faster growth of productive jobs outside of agriculture, especially in organised manufacturing and services, even while improving productivity in the former.
“There needs to be complementary reforms in the services and regulatory framework of the country to boost manufacturing and create jobs. Speedily filling up vacancies in regulatory bodies is one such needed exercise that will go a long way in improving how businesses operate in the country,” Bhanumurthy added.
According to the survey, capital formation in the private sector, after the consolidation in the second decade due to balance sheet issues, has begun to recover after Covid.
There is a need to improve private participation in funding infrastructure projects, the survey noted. The addition to the stock of infrastructure in the last five years owed predominantly to public sector financing, it said, adding that private sector participation is not forthcoming to the extent desired.
Focus now has to be on implementation of measures targeting to put the private sector non-residential investment (including equipment, structures, software and R&D) on a sustainable footing so that it can catalyse the efforts towards increasing investment to 35 % of GDP.