Lok Sabha Question No. 182 (STARRED), answered on 2016-07-29
Subject: Domestic Capital Investment
Ministry: FINANCE
Asked by: ANANT KUMAR DATTATREYA HEGDE

- (a) the details of total domestic capital investment and foreign capital investment separately during the last three years;
- (b) whether the Government has plans to encourage domestic capital investments and if so, the details thereof;
- (c) the measures taken or proposed to be taken to increase domestic capital investment; and
- (d) whether adequate steps have been taken to strengthen economic credentials and make India strongest economies of the world, if so, the details thereof?

## FINANCE MINISTER (SHRI ARUN JAITLEY)

(a)  to (d): A Statement is laid on the Table of the House.

## STATEMENT REFERRED TO IN REPLY TO LOK SABHA STARRED QUESTION NO. 182 BY SHRI SHRI ANANTKUMAR HEGDE DUE FOR ANSWER ON JULY 29, 2016

Gross capital formation (GCF), in other words investment, in the economy is composed of gross fixed capital formation (GFCF),  change  in  stocks  and  valuables.  The  major  components  of  GFCF  are  construction  and  accumulation  of machinery and equipment. Net acquisition of valuables covers precious articles, gems and stones, silver, gold, platinum and gold and silver ornaments. The position of investment and its components during 2012-13 to 2015-16 is presented in the following table.

| Gross capital formation (investment) in the economy and its components at current prices (in Rs. crore)   | Gross capital formation (investment) in the economy and its components at current prices (in Rs. crore)   | Gross capital formation (investment) in the economy and its components at current prices (in Rs. crore)   | Gross capital formation (investment) in the economy and its components at current prices (in Rs. crore)   | Gross capital formation (investment) in the economy and its components at current prices (in Rs. crore)   |
|-----------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|
|                                                                                                           | 2012-13*                                                                                                  | 2013-14*                                                                                                  | 2014-15@                                                                                                  | 2015-16 ^                                                                                                 |
| Gross capital formation                                                                                   | 3842743                                                                                                   | 3911601                                                                                                   | 4276158                                                                                                   | #                                                                                                         |
| (i) Gross fixed capital formation                                                                         | 3321413                                                                                                   | 3564320                                                                                                   | 3844366                                                                                                   | 3972401                                                                                                   |
| (ii) Change in stocks                                                                                     | 212363                                                                                                    | 179971                                                                                                    | 220557                                                                                                    | 234444                                                                                                    |
| (iii) Valuables                                                                                           | 273775                                                                                                    | 162982                                                                                                    | 192663                                                                                                    | 187461                                                                                                    |

Note: The sum of GFCF, change in stocks and valuables does not add up to GCF because of errors and omissions. Note: * Second Revised Estimates  @ First Revised Estimates  ^ provisional estimates

# The GCF for the year 2015-16 has not yet been published by the Central Statistics Office.

Investment can be partly or fully financed by gross savings in the economy. The shortfall, if any, in gross savings is met from net capital inflow from the rest of the world. The saving investment balance mirrors the current account balance in the Balance of Payments. The current account deficit is financed by net capital inflows  like foreign direct investment, foreign  portfolio  investment,  etc.  The  latest  year  for  which  the  information  on  financing  of  gross  capital  formation  is available is 2014-15. The information for three years from 2012-13 to 2014-15 is presented in the following table:

|                                                                    | Sources of financing of gross capital formation (in Rs. crore)     | Sources of financing of gross capital formation (in Rs. crore)     | Sources of financing of gross capital formation (in Rs. crore)     | Financing of gross capital formation (percentage share)   | Financing of gross capital formation (percentage share)   | Financing of gross capital formation (percentage share)   |
|--------------------------------------------------------------------|--------------------------------------------------------------------|--------------------------------------------------------------------|--------------------------------------------------------------------|-----------------------------------------------------------|-----------------------------------------------------------|-----------------------------------------------------------|
| Items                                                              | 2012-13*                                                           | 2013-14*                                                           | 2014-15@                                                           | 2012-13*                                                  | 2013-14*                                                  | 2014-15@                                                  |
| Gross Savings                                                      | 3364823                                                            | 3725046                                                            | 4116700                                                            | 87.6                                                      | 95.2                                                      | 96.3                                                      |
| Net capital inflow from the rest of the world                      | 477920                                                             | 186555                                                             | 159458                                                             | 12.4                                                      | 4.8                                                       | 3.7                                                       |
| Source: Central Statistics Office Note: * Second Revised Estimates | Source: Central Statistics Office Note: * Second Revised Estimates | Source: Central Statistics Office Note: * Second Revised Estimates | Source: Central Statistics Office Note: * Second Revised Estimates | @First Revised Estimates                                  | @First Revised Estimates                                  | @First Revised Estimates                                  |

Encouraging domestic investment and enterprise is one of the focus areas of the Government. The complementarities built around the flagship Make-in-India programme, including comprehensive measures for improving the ease of doing business, Skill India and  Digital India  initiatives; encouragement to budding entrepreneurial talent under the Start-up India and Stand-up India Initiatives; and, an investor friendly ecosystem for business and investment-related clearances and compliance are expected to encourage domestic enterprise. The Government's focus on rural infrastructure; the launch of innovative financial vehicles such as Infrastructure Debt Funds, Real Estate Investment Trusts/Infrastructure Investment  Trust  and  National  Infrastructure  Investment  Fund;  creation  of  a  framework  for  municipal  bonds  and issuance  of  Tax  Free  Bonds;  etc.,  will  help  bridge  the  infrastructure  deficit  and  create  a  congenial  atmosphere  for private investment. Besides, Railways have substantially increased their investment allocations. This, combined with the increased allocations in the road sector, will give a boost to transport infrastructure. The steps taken by the Government to foster economic growth, price stability and fiscal prudence have improved the overall macroeconomic stability, which brightens the investment climate in the country. The initiatives like passage of the Insolvency and Bankruptcy Code, 2016  consolidating  the  laws  relating  to  insolvency  of  companies  and  limited  liability  entities,  unlimited  liability partnerships and individuals into a single legislation; the phased program for bank recapitalization; specific measures for textiles industry; and, the system of e-auction of coal mines being successfully implemented by the Government to bring about transparency in the allocation of coal mines will also encourage investment in the country.

The Government's systematic focus on economic growth and macroeconomic stability and the measures taken in this regard have made India one of the fastest growing major economies in the world. The efforts to simplify business and investment-related clearances, fast-track governance reforms and development of skills have helped India improve its ranking  in  the  ease  of  doing  business  index,  as  per  the  World  Bank  Group's  Doing  Business  Report,  2016.  The comprehensive reforms in foreign direct investment (FDI) have resulted in the highest ever FDI inflows in 2015-16.

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