India’s public and private sector investment over past decade is more than what it invested over last 7 decades

India spent USD 8 trillion in new investments over the past decade, over half of what the country has done since its independence, according to a report put out by DSP Asset Managers.

Over the last seven and a half decades, that means since India’s Independence in 1947, USD 14 trillion has been spent on investments, including spending on housing by households, infrastructure creation by the government, and private capital expenditure.

India has spent USD 8 trillion on new investments over the last 10 years. The government in each of its annual budgets has been increasing capital expenditure allocations.

As the base becomes large, the investments made in the past decade is expected to repeat itself in the next five years, the DSP report said.

“The size of India’s annual investments is becoming large enough for it to get your immediate attention,” it said.

The report asserted that India has come out of an investment winter.

The investment to GDP ratio (measured as Gross Fixed Capital Formation to GDP) peaked in 2011 and remained low until the Covid-led disruption upended the supply chains.

Post-pandemic recovery and a large push through government expenditure, the investments are making a comeback.

“While the global economic landscape has been a bit wobbly, India has remained a steady ship in choppy waters. The economic growth has been consistently strong with corporate top line and profit growing steadily.”

Over the past 12 months, most economies have seen a slowdown in their manufacturing sector or services or both, the report said, supporting its arguments by putting out a graph where

India’s manufacturing PMI could be seen on the top.

“India, over the past year, has seen a consistent growth in economic output and business sentiment,” it added.

“Its divergent economic trends have long been an outcome ‘in-waiting’, though never realized. But over the past year, India has shown a consistency which is probably the first evidence suggesting that India’s economic and business cycle can withstand global turbulence of manageable magnitude.”

A stable external situation is behind the country’s growth story, it asserted.

Most emerging market currencies are struggling with negative carry against the US Dollar, which forced the central banks of these countries to be cautious in FX policy and setting their interest rates.

In India, the rupee has been steady over the past year, helped by a mix of strong current accounts, strong FPI inflows, especially in debt markets, and RBI’s wait-and-watch approach.

“Strong services flows and remittances have been a big pillar of support which has kept India’s macroeconomic outlook stable.”

Switching to India’s stock markets, which have been touching fresh highs, every now and then, it said India has now become the second-largest equity market in emerging markets. India’s share in emerging markets has increased from 7.8 per cent in 2020 to 17.7 per cent at present.

This substantial growth is primarily attributed to the increased profitability of companies, surpassing their pre-COVID growth rates, and to the consistent performance of equity indices, it gave its rationale for this stellar performance.

Explaining what contributed to healthy levels of profit for corporate India, it said a growing topline and stable profit margins for Indian companies and a relatively stable financial and tax regimen helped.

It also cautioned however that Indian equities no longer represent a bargain opportunity and it lacks margin of safety.

The size of India’s GDP is currently ranked 5th, after the US, China, Germany, and Japan. It overtook the UK in 2022.

Just a decade ago, Indian GDP was the eleventh largest in the world. Currently, India’s GDP is estimated to be around USD 3.7 trillion.

India’s GDP grew at a massive 8.4 per cent during the October-December quarter of the financial year 2023-24, and the country continued to remain the fastest-growing major economy and is poised to maintain its growth trajectory going ahead.

India is set to remain the fastest-growing among major economies in 2024, according to latest International Monetary Fund’s latest World Economic Outlook. IMF, in its latest outlook, raised India’s growth projections for 2024 from 6.5 per cent to 6.8 per cent.

India’s economy grew 7.2 per cent in 2022-23 and 8.7 per cent in 2021-22, respectively.