The new Modi administration has a lot to do to repair the sputtering economy. It just can’t afford to lose the popular mandate.
India has voted in a new government decisively. While it remains a moot point whether or not economic issues influenced the electoral outcome, the fact is that the economic challenges facing India are real and need to be taken head-on by the new government.
Improving investments
The controversy over the growth numbers notwithstanding, growth requires savings and investment. And India has not witnessed a favourable trend with regard to both. Investment rates, measuring fixed capital formation at the economy level, are down to 28.4 percent in 2017-18 from 34.3 percent in 2011-12. More worrying are the trends with regard to gross capital formation (GCF) at a sectoral level. Table 1 shows that GCF to output ratio is not just lower in employment-intensive sectors like manufacturing and mining, but has been declining over time.
Source: Moneycontrol.com
