Yet Another Major Setback

The slump in investments has been the Achilles heel of the economy for more than a decade down. Despite repeated efforts, the government has been unable to reverse the sharp fall in domestic investments since 2011–12. Consequently, the domestic investments or gross capital formation in the economy remain stuck more than 7 percentage points below their peak levels.

The only silver lining in this otherwise bleak scenario has been the consistent improvement in the inflow of foreign direct investments (FDI) during this period. In fact, trends show that the gross FDI inflows have consistently picked up from $34.3 billion in 2012–13 to a record $84.8 billion in 2021–22. That is more than a twofold increase in just about a decade The ratio of gross FDI to gross domestic product (GDP) has also gone up from 2.3% in 2017–18 to 3.1% in 2020–21. However, it slid marginally after that to 2.7% in 2021–22.