Steady Increase In Private Gross Fixed Capital Formation Over Last Five Years: MoS Finance

In a detailed report presented to the Rajya Sabha, the Ministry of Finance, through Minister of State Pankaj Chaudhary, addressed an unstarred question posed by Randeep Singh Surjewala concerning the state of private capital investment in India over the past five years.

The minister's response provided a comprehensive overview of private capital expenditure (capex), corporate bond issuances, bank credit flows, and gross fixed capital formation (GFCF).

The data, sourced from the Ministry of Statistics and Programme Implementation (MoSPI), highlights a steady increase in GFCF by private corporations, with a notable dip in 2020-21 due to the COVID-19 pandemic.

This dip was followed by a recovery in subsequent years For instance, the GFCF by private non-financial corporations rose from Rs 19.0 lakh crore in 2018-19 to Rs 29.0 lakh crore in 2022-23. Similarly, GFCF by private financial corporations showed a slight but steady increase from Rs 0.4 lakh crore to Rs 0.5 lakh crore in the same period.

Minister Chaudhary acknowledged the concern raised by Surjewala regarding the slump in private capex to a 20-year low in the April-June quarter of 2024.

The primary reasons cited for this downturn include ongoing global economic instability leading to cautious investment strategies by corporations, elevated borrowing costs due to high interest rates, and lingering effects of the pandemic and geopolitical tensions impacting supply chains, causing delays and increased costs.

The Securities and Exchange Board of India (SEBI) reported that over the past five years, a total of Rs 36,92,437 crore was raised through listed non-convertible securities. There was a noticeable increase in both public issues and private placements in the 2023-24 period, with the total amount raised reaching Rs 8,56,924 crore, up from Rs 6,89,771 crore in 2019-20. This trend reflects a growing reliance on corporate bonds as a source of capital.

Data from the Reserve Bank of India (RBI) shows a consistent increase in bank credit flows to industries and corporates, excluding MSMEs, over the last five years

The gross outstanding advances rose from Rs 40,29,744 crore in 2019-20 to Rs 57,76,264 crore in 2023-24. This increase in bank credit is indicative of the banking sector's support for corporate expansion and investment.

Despite the pandemic-induced contraction in 2020-21, GFCF demonstrated robust recovery with a compound annual average growth of 12.3 per cent between 2019-20 and 2023-24. GFCF at current prices increased from Rs 57.2 lakh crore in 2019-20 to Rs 91.1 lakh crore in 2023-24.

The pandemic had a significant impact on capital formation in 2020-21, causing a decline of 5.2 per cent, but the subsequent years saw substantial growth, with a notable increase of 28.7 per cent in 2021-22. (ANI)