Editorial Analysis – The FM’s call for Industrial Investment

GS Paper 3

Syllabus – Indian Economy and issues

Finance Minister Nirmala Sitharaman asked industries to invest more in the manufacturing sector.

In the hope of revitalizing private investment, the government had in September 2019 cut the tax rate for domestic companies from 30% to 22% if they stopped availing of any other tax SOP (standard operating procedure).

What is the current scenario?

• In the GDP figures for the April-June 2022 quarter, gross fixed capital formation (GFCF) at 2011-12 prices rose 9.6% to ₹12.77 lakh crore, from ₹11.66 lakh crore in Q1 of FY20, which was the pre-pandemic period.
• While private final consumption expenditure, an essential pillar of our economy, climbed 26% year-on-year for the June quarter, the ₹22.08 lakh crore of private spending in April-June 2022 was a significant ₹54,000 crore, or 2.4%, less than that spent in the preceding quarter.
• Industrial production has shown growth in each of the first five months of this fiscal year starting April, compared with a year earlier; but worryingly, monthly numbers as seen on the Index of Industrial Production (IIP) and the S&P Purchasing Managers’ Index (PMI) for Manufacturing have progressed in fits and starts.

Gross Fixed Capital Formation –

• Gross fixed Capital Formation (GFCF) represents investment demand within the economy.
• GFCF isn’t a measure of total investment, because only the worth of net additions to fixed assets is measured, and every one variety of monetary assets, further as stocks of inventories and other operational prices are excluded.

Private Final Consumption Expenditure –

• Private final consumption expenditure is defined as expenditure on goods and services for the direct satisfaction of individual needs.
• Whereas government consumption expenditure includes goods and services produced by the government, as well as purchases of goods and services by the government that are supplied to households.

Index for Industrial Performance –

• The Index of Industrial Production (IIP) is an index that shows the growth rates in different industry groups of the economy in a stipulated period of time.
• The IIP index is computed and published by the Central Statistical Organisation (CSO) on a monthly basis.
• IIP is a composite indicator that measures the growth rate of industries in the economy.
• IIP measures the performance of the economy on the basis of eight core industries, with 2011-12 as base year.

Source – The Hindu