Investments to Manufacturing Sector
- Recently, the finance minister Nirmala Sitharaman asked captains of industry what was holding them back from investing in manufacturing.
- She likened industry to Lord Hanuman from the Ramayana by stating that industry did not realise its own strength and that it should forge ahead with confidence.
- The government reduced the tax rate for domestic enterprises from 30% to 22% in September 2019 if they stopped utilising any other tax SOPs in an effort to boost private investment (standard operating procedure).
- Private sector investment in India has lagged behind for almost a decade. “Amber lights are blinking if we look at current economic growth drivers.
- The global recession will put the export narrative in jeopardy, and as the fiscal deficit shrinks, so will the government’s ability to boost domestic demand.
- Private consumption is only concentrated in certain tiers of the income pyramid because of the K-shaped recovery.
- Gross fixed capital formation (GFCF) at 2011–12 prices increased 9.6% to $12.77 lakh crore in the GDP data for the quarter that ended in June from $11.6 lakh crore in Q1 of FY20, which was the pre–pandemic period.
- This is in light of the overall GDP growth of 2.8% from Q1 of FY20 to Q1 of FY23, from 35.85 lakh crore to 36.85 lakh crore.
- Gross value added (GVA) in the manufacturing sector increased 6.5% to 6,05,104 in Q1 FY23 from 5,68,104 in Q1 FY20.
- However, comparing manufacturing growth from the quarter before that, April to June, to the previous quarter, January to March, reveals that the industry has shrunk by 10.5%.
- Even though private final consumer expenditure, a crucial component of our economy, increased 26% year over year for the June quarter, the amount spent privately between April and June 2022 was much lower at 22.08 lakh crore, or 2.4%, than it had been the previous quarter.
- Additionally, GFCF, a measure used as a stand-in for private investment, decreased by 6.8% quarter over quarter.
Source The Hindu