Domestic investment share in GDP rose to 29.6% in H1 of FY24: Govt

Investment in the first half of FY24 stood strong, the share of Gross Fixed Capital Formation (GFCF), a proxy for domestic investment, in GDP rose from 29.1 per cent in the first half of FY23 to 29.6 per cent in the first half of FY24.

“The strength of domestic investment is the result of the government’s continued emphasis on capital expenditure, which has also incentivised states to increase their capex,” a half-yearly economic review report by the Finance Ministry said.

As per the report, the pick-up in domestic investment was driven by enhanced provision for capital expenditure by the government which is leading to crowding in of private investment. The crowding in of private investment is evident in several high-frequency indicators (HFIs) like the import of capital goods, bank credit to the infrastructure sector, and new project announcements reported by private agencies. “Rising investment is further reflected in the growth of construction activity, as seen in increasing steel consumption and cement production,” the report added.

The Centre’s capex grew by 33.7 per cent in April-October FY24 over the corresponding period last year. It's not only the central government capital expenditure that drove the private investment in the country, capex by states also grew strongly at 49.8 per cent annually in the first half of FY24.

Axis Bank corporate capex data shows a 15 per cent annual increase in corporate capex in the first half of FY24. “The growth was primarily driven by trading, gas distribution, auto and electricity sectors,” the report stated.