The Indian government is set to tap the brakes on a torrid pace of capital investment growth in the coming fiscal year as a slowing economy limits spending power by weakening tax revenue, according to a Reuters poll of economists.
Food and fertiliser subsidies that help two-thirds of India's 1.4 billion people will also be scaled back, according to the survey.
Now, that robust pace of government investment is set to slow to barely half its previous rate in the fiscal year to March 2024, according to the Jan. 13-20 Reuters poll of 39 economists. "The government has shown an express motivation to ramp up capex, and the expected absence of a robust recovery in private capex will make public capex particularly important in FY24," noted Sonal Varma, chief economist for India and Asia ex-Japan at Nomura.The total of public and private investment as a proportion of the economy has declined since 2014, when Modi's Bharatiya Janata Party swept to power.
The ratio of that measure of investment to economic output has declined from a record high of nearly 36% in 2007/08 to about 29% in 2021/22.While there are early signs of a modest pick-up in private sector investment, economists in the poll warned a global economic slowdown underway could derail it.
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