Post-pandemic, climate change will drive investments

 After rising from 5.5 per cent of GDP in 2000-01 to nearly 14.5 per cent by 2007-08, corporate investment has flatlined around 10.5 per cent of GDP. Household investment rose to 15.7 per cent of GDP by 2011-12, declined to 9.4 per cent of GDP by 2015-16 and has recovered to just over 11.5 per cent of the GDP today (express photo)

Three years after the pandemic and despite 8 per cent average growth over the last two years, the level of India’s GDP is still running 5 per cent below that implied by its pre-pandemic trajectory. This is a measure of the permanent scarring from the pandemic and unless India grows over 7-8 per cent in the coming years, the potential loss of GDP will only widen.

Many would argue that, as in the aftermath of the 2008 global financial crisis (GFC), the post-pandemic trend growth is likely to be lower, and thus, this is an artificially high benchmark. In the five years prior to the GFC, India averaged 8 per cent growth when rapid globalisation boosted exports and private investment soared to set up the needed supply chains. Since the GFC, global trade has languished and with it, so has investment.

After rising from 5.5 per cent of GDP in 2000-01 to nearly 14.5 per cent by 2007-08, corporate investment has flatlined around 10.5 per cent of GDP. Household investment rose to 15.7 per cent of GDP by 2011-12, declined to 9.4 per cent of GDP by 2015-16 and has recovered to just over 11.5 per cent of the GDP today. While some of this decline reflects the slowdown in residential housing, one suspects that a large part is due to falling SME investment, which is subsumed in this category.

First published on: 03-06-2023 at 07:25 IST

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