Why not investing private companies in India despite standard profits?

What is it required for private companies in India to start investing in building new factories and companies?

It is a question that confuses political makers for years. As a share of GDP (GDP), the private investment in India was in a state of decline since the 2007 global financial crisis, although the total economy recorded global growth rates.

After a long stop, the investment rate increased slightly in 2022 and 2023, but the latest data from a prominent classification agency shows private sector expenses as part of the total economy in India to the lowest level in the 33 % decimal in this fiscal year.

An analysis of ICRA of 4,500 listed companies and 8,000 unlisted companies reveals that although the investments made by players included in the list, those that were contracted in the unwovered entities.

Over the years, many economists have raised similar concerns about the slowdown in private investments.

Businessman banking Oud Among many of those who raised their concerns recently about the “animal souls” that fade in India, urging young business owners who inherited companies to build new business instead of sitting tightly and managing their current wealth.

Data shows from the Consultative Investment Consulting company’s research that non -Indian financial companies were sitting in cash worth 11 % of their total assets, which confirms the opinion that companies do not spend money in making new investments.

Why do you choose the homes of Indian companies to do this?

ICRA chief classification officials said that weak home consumption in urban areas, silent demand for export and the flow of cheap Chinese imports in some sectors was among the factors that “restricted the capacity expanding plans for the homes of Indian companies.”

But besides the most urgent reasons, the private investment motivation was low due to the “global inceptions and excessive capacity”, as the economic survey in India indicated earlier this year.

The slowing of private investments has a direct impact on the prospects for growth in India.

Companies investment in assets such as factories, machinery or construction – which are also called the total fixed capital formation – are about 30 % of GDP, and are the second largest shareholder after special consumption.

The gross domestic product of the entire year in India is expected to be closed by 6.5 %, which is severely less compared to 9.2 % last year. Growth has been marked due to slower consumption.

Experts say that all the main wheels of growth, including exports, slowness, and definitions of US President Donald Trump, exacerbate the global uncertainty, its own investment will be essential for India to reach the long -term growth goals.

According to the latest World Bank, India will need to grow by 7.8 % on average over the next 22 years to achieve its high -income ambition by 2047.

The key to this will be to increase private and public investment to at least 40 % of GDP from 33 % currently, and the bank’s estimates.

The government, on its part, has increased significantly from spending, especially on the infrastructure. Corporate tax rates also reduced 30 % to 22 %, and got billions of dollars in the production associated with production of manufacturers over the years. The availability of bank credit is no longer a restriction, and the organization has eased through organizational restrictions between 2003 and 2020.

But any of this has urged India to enhance spending.

According to Sajid Chenewe, the chief economist in India, the big problem is Lack of demand In the economy to justify the offering of additional capabilities.

The recovery in India after guardianship was not equal, as the consumer category does not expand enough quickly. Thus the demand for goods and services was struck, with Spending It has been further reduced due to low wages, although companies’ profitability has increased to the highest level in 15 years this year.

“Just a financially strong companies do not mean that they will invest automatically. Companies will invest only if they expect good returns,” Qinoy said at an event in Mumbai earlier this year.

Rathin Roy, a former member of the Prime Minister’s Economic Advisory Council (PMAAC), refers to other deeper structural issues that arrest the appetite for investment.

“The entrepreneurs have lacking the energy needed to produce goods that have generated a new demand. A classic example of this is the construction – where there is a stock that is not built in urban areas, but it is an inability between the builders to go to the second and three cities and benefit from the newer markets,” Roy told the BBC.

He also agreed to Mr. Kotak’s views about the increasing direction of the heirs of business that transforms wealth managers instead of building companies.

“Business houses have been discovered through Covid-19 that they do not need to do business to earn money. They can only invest and hit without building anything new,” said Roy. These investments not only occur in the local stock market. “A lot of money flows outside India and chases returns elsewhere,” he added.

But things can turn into an angle, according to ICRA.

Interest rate discounts in addition to reducing the income tax worth $ 12 billion provided to individuals in the federal budget “they preach well to support the demand for local consumption,” according to the report.

The Indian Central Bank also says that more private companies have shown an intention to invest this year compared to last year, although the amount of this intention results from the actual funds that are still being seen.

The uncertainty related to global trade definitions can delay any expected investments, according to ICRA.

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