Promoting Private Investment Chapter 15: Promoting Private Investment Private investment is one of the major sources of growth in the national economy. Capital outlays in production sectors not only expand the productive capacity of the economy but also create many new jobs. One of the key targets in the Charter of the Economy, identified in Chapter One, is to raise the private investment to GDP ratio from the currently depressed level of 10% of the GDP to 12.5 percent by 2024-25. 15.1. Level and Composition of Private Investment The trend in level of private investment and total investment, including public investment, is given in Table 15.1. The two-way relationship between the level of private investment and GDP growth is clearly visible. During the period of high growth of the economy, from 2004-05 to 2007-08, the level of investment by the private sector grew rapidly and reached a peak level of over 16 percent of the GDP in 2006-07. This created the capacity for higher growth. Table 15.1: Historical Path of Private and Public Investment Year Private Public Total Investment Investment Investment 2000-01 10.2 5.7 15.9 2004-05 13.1 4.3 17.4 2009-10 10.2 3.6 13.8 2014-15 10.4 3.7 14.1 2020-21 9.8 3.8 13.6 Source: PES (% of GDP) GDP Growth Rate(%) 2.0 9.0 2.6 4.1 3.9 Thereafter, as the growth rate of the economy plummeted, the level of private investment fell sharply to below 10 percent of the GDP. There had been a modest recovery in 2017-18 when the GDP growth rate rose to above 5 percent. The last two years have witnessed a drop again. During the peak years, the share of private investment in total investment was above 70 percent. It reached a low of 67 percent in 2017-18 due particularly to the jump in public investment to above 5 percent of the GDP. 145