A Perspective on the Slowdown in Private Corporate Investments in India

Investment Slowdown in India: Role of Monetary policy, Financial Sector and Economic Uncertainty

“…The study hails that timely assessment of cyclical investment is required to correct and follow appropriate policy measures to safeguard against future slowdown. Analysing annual data ranging from 1995-2017 with OLS method, it was hailed that uncertainty in the overall macroeconomic and business environment, slower demand, real interest rates, and public investments had signi cant impacts on private business investments in India (Dastidar & Ahuja 2019). Bhardwaj and Kumar (2019) noted that size matters a lot for investment in monetary policy channels-credit and interest.…”

“…Accordingly, past research has highlighted the role played by nancial sector development, measured by activities of nancial intermediaries and capital markets, towards determining investment in developed economies (Gurley and Shaw, 1955;Greenwood & Smith, 1997). According to the existing literature, the investment slowdown in India can be linked to debt burden and tight nancial markets (RBI, 2019), heightened levels of policy uncertainty and an unfavourable business environment (Tokuoka, 2012; RBI, 2013; Anandand Tulin 2014); the slower pace of public investment (Bahalet al, 2018) and macroeconomic uncertainty attached with uctuating external demand (Dastidar and Ahuja, 2019). Most of these studies also reported that the economic activity, real interest rate, scal de cit and bank credit were India's major determinants of investment activity.…”

An Evaluation of Monetary Policy in India: A Sustainable Development Perspective

“…During the 2007-2008 global crisis, firms faced severe liquidity crunch as uncertainty loomed large and limits of traditional monetary policy, especially the interest channel came to the fore. In the Indian context, this was reflected, especially in the failure of monetary measures to address the prolonged slump in private business investments (Dastidar & Ahuja, 2019;Mallick & Agarwal, 2007;RBI, 2014) which has deepened further due to the COVID-19 pandemic. Indeed, unconventional policies (e.g.…”

“…The ongoing investment slowdown in India suggests that while the real interest rate may be important in the short run, uncertainty regarding the future can severely retard investment prospects in the medium run, leading to a prolonged slump (see e.g. Dastidar & Ahuja, 2019). Expectation about the future is also an important determinant of the demand for housing, just as it for business investments.…”