{"id":48216,"date":"2025-07-15T21:06:02","date_gmt":"2025-07-15T15:36:02","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=48216"},"modified":"2025-07-31T13:03:41","modified_gmt":"2025-07-31T07:33:41","slug":"corporate-investment-lagging-behind","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/15-07-2025\/corporate-investment-lagging-behind","title":{"rendered":"Corporate Investment Lagging Behind"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>The Ministry of Statistics and Program Implementation (MoSPI) <\/strong>released the monthly growth rate of the<strong> Index of Industrial Production (IIP)<\/strong>, which has slowed to a <strong>nine month low of 1.2%.<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Index of Industrial Production (IIP)<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It is one of the prime indicators of economic development for the measurement of trends in the <strong>behavior of Industrial Production<\/strong> over a period of time with reference to a chosen base year.\n<ul class=\"wp-block-list\">\n<li>It indicates the <strong>relative change of physical production<\/strong> in the field of industries during a specified year as compared to previous year.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Released by: <\/strong>National Statistical Office (NSO).<\/li>\n\n\n\n<li><strong>Ministry:<\/strong> Ministry of Statistics and Programme Implementation (MoSPI).<\/li>\n\n\n\n<li><strong>Frequency: <\/strong>Monthly.<\/li>\n\n\n\n<li><strong>Base Year (as of now):<\/strong> 2011\u201312.<\/li>\n\n\n\n<li><strong>IIP is composed of three broad sectors:<\/strong>\n<ul class=\"wp-block-list\">\n<li>Manufacturing (77.6% weight);<\/li>\n\n\n\n<li>Mining (14.4% weight);<\/li>\n\n\n\n<li>Electricity (8.0% weight).<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Another classification is based on the use of goods, which includes: <\/strong>Primary Goods, Capital Goods, Intermediate Goods, Infrastructure\/Construction Goods, Consumer Durables and Consumer Non-Durables.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Why has Investment not Picked Up?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Demand Uncertainty: <\/strong>Weak consumer demand since the COVID-19 pandemic has led to lower capacity utilization.\n<ul class=\"wp-block-list\">\n<li>Companies are reluctant to invest in new capacities without clear signals of sustained demand growth.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Excess Capacity in Industry: <\/strong>Many sectors, especially manufacturing, are still operating below optimal capacity.\n<ul class=\"wp-block-list\">\n<li>Firms prefer to use existing infrastructure fully before committing fresh capital.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Global Economic Uncertainty: <\/strong>Geopolitical tensions (e.g., Russia-Ukraine war, Red Sea crisis, global inflation) have impacted trade and investor confidence.\n<ul class=\"wp-block-list\">\n<li>Uncertainty in major economies affects India\u2019s exports and investor sentiments.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Slow Credit Transmission: <\/strong>Even though repo rates were low post-COVID, credit growth to industry remained muted until recently.\n<ul class=\"wp-block-list\">\n<li>Banks preferred retail lending (like housing and auto loans) over riskier industrial lending.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Infrastructure and Logistics Bottlenecks:<\/strong> While improvements are ongoing (e.g., Gati Shakti, PM Gati Shakti National Master Plan), logistics costs in India remain high.\n<ul class=\"wp-block-list\">\n<li>Delays in project clearances and land acquisition slow down capital formation.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Low FDI in Key Sectors: <\/strong>FDI inflow is high in digital and services sectors but weak in manufacturing and infrastructure.\n<ul class=\"wp-block-list\">\n<li>Despite the<a href=\"https:\/\/www.nextias.com\/blog\/production-linked-incentive-pli\/\" data-type=\"link\" data-id=\"https:\/\/www.nextias.com\/blog\/production-linked-incentive-pli\/\"> Production Linked Incentive<\/a> (PLI) schemes, foreign players remain cautious due to concerns over market scale, ease of doing business, and exit options.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Delayed Government Capex Multiplier: <\/strong>While public investment (especially in infrastructure) has increased, the crowding-in effect on private investment is yet to fully materialize.\n<ul class=\"wp-block-list\">\n<li>State-level capex has also remained weak due to fiscal constraints.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Policy Measures Taken<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Corporate Tax Cut (2019):<\/strong> Reduced from 30% to 22%, aimed at boosting private sector profitability and investments.<\/li>\n\n\n\n<li><strong>Capex Push: <\/strong>Government increased spending on infrastructure in recent budgets to stimulate demand and crowd-in private investment.<\/li>\n\n\n\n<li><strong>Monetary Easing:<\/strong> RBI reduced interest rates to lower borrowing costs and improve liquidity.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Conclusion<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>India\u2019s industrial and investment slowdown is rooted in demand-side weakness, not merely supply or financial constraints.&nbsp;<\/li>\n\n\n\n<li>The private sector awaits demand visibility, and investment cannot precede demand recovery.&nbsp;<\/li>\n\n\n\n<li>A coordinated policy approach, grounded in macro demand management, is needed \u2014 beyond tax cuts and interest rate tweaks.<\/li>\n<\/ul>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.thehindu.com\/business\/Economy\/why-is-corporate-investment-falling\/article69810527.ece#:~:text=Investment%2C%20first%20and%20foremost%2C%20depends,slowdown%20because%20demand%20is%20down\" rel=\"nofollow noopener\" target=\"_blank\"><strong>TH<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<h3><strong>Context<\/strong><\/h3>\n<li class=\"ms-5\">The Ministry of Statistics and Program Implementation (MoSPI) released the monthly growth rate of the Index of Industrial Production (IIP), which has slowed to a nine month low of 1.2%.<\/li>\n<p><\/p>\n<h3><strong>Index of Industrial Production (IIP)<\/strong><\/h3>\n<li class=\"ms-5\">It is one of the prime indicators of economic development for the measurement of trends in the behavior of Industrial Production over a period of time with reference to a chosen base year.<\/li>\n<li class=\"ms-5\">It indicates the relative change of physical production in the field of industries during a specified year as compared to previous year.<\/li>\n<li class=\"ms-5\">Released by: National Statistical Office (NSO).<\/li>\n<li class=\"ms-5\">Ministry: Ministry of Statistics and Programme Implementation (MoSPI).<\/li>\n<p><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/15-07-2025\/corporate-investment-lagging-behind\" class=\"btn btn-primary btn-sm float-end\">Read\u00a0More<\/a><\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-48216","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/48216","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=48216"}],"version-history":[{"count":3,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/48216\/revisions"}],"predecessor-version":[{"id":49691,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/48216\/revisions\/49691"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=48216"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=48216"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=48216"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}