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1India Is Chasing China’s Economy. But Something Is Holding It Back.
Long-term investment in India by businesses is stagnant, and foreign money is falling, even as the government is driving growth with infrastructure spending.
Jan 2, 2024, The New York Times
India’s economy is booming. Stock prices are through the roof, among the best performing in the world. The government’s investment in airports, bridges and roads, and clean-energy infrastructure is visible almost everywhere. India’s total output, or gross domestic product, is expected to increase 6 percent this year — faster than the United States or China.
But there’s a hitch: Investment by Indian companies is not keeping pace. The money that companies put into the future of their businesses, for things like new machines and factories, is stagnant. As a fraction of India’s economy, it is shrinking. And while money is flying into India’s stock markets, long-term investment from overseas has been declining.
Green and red lights are flashing at the same time. At some point soon, the government will need to reduce its extraordinary spending, which could weigh on the economy if private sector money doesn’t pick up.
No one expects India to stop growing, but a rise of 6 percent is not enough to meet India’s ambitions. Its population, now the world’s biggest, is growing. Its government has set a national goal of catching up to China and becoming a developed nation by 2047. That kind of leap will require sustained growth closer to 8 or 9 percent a year, most economists say.
The missing investment could also present a challenge for Narendra Modi, the prime minister since 2014, who has concentrated on making India an easier place for foreign and Indian companies to do business.
