Indian Economy’s Sweet Spot and Private Sector’s Reluctance to Invest

• The Indian economy is in a favorable position, with the Narendra Modi government reducing and rationalizing goods and services tax rates.

• The Centre’s capital expenditure on public infrastructure has increased from Rs 3,35,726 crore in 2019-20 to a budgeted Rs 11,21,090 crore in the current fiscal.

• The Production Linked Incentive Scheme and the India Semiconductor Mission have attracted investments, particularly in mobile phone manufacturing by Apple and Samsung.

• Indian corporates have comfortable or low debt service and debt-equity ratios with large cash buffers.

• The gross and net non-performing asset ratios of commercial banks have declined to multi-decadal lows.

• Low levels of consumer price inflation and soft interest rates with enhanced credit availability fuel a virtuous cycle of investment, jobs, incomes, and spending.

• A recent Reserve Bank of India study shows the total cost of such projects by private corporates has risen from Rs 1,96,580 crore in 2021-22 to Rs 3,51,351 crore, Rs 5,47,734 crore, and Rs 4,97,235 crore in the following three fiscals.

• The private sector, either companies or households, is not investing and spending more due to general uncertainty, inflation, Trump tariffs, and geopolitical disruptions.

Private sector investment slowdown is important topic for Civil service exam (WBCS).

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