MC Graphixstory: Will Budget 2024 give a further fillip to capital asset formation?

India is projected to grow at 7.3 percent this financial year, maintaining its status as the world’s fastest growing major economy. A key pillar of GDP growth is gross fixed capital formation (GFCF), which is an indicator of productive asset creation in the economy.

GFCF has grown from a low of 30.7% of Gross Domestic Product (GDP) in FY15 to 35.3% of GDP in the second quarter (July – September) of the current financial year. This is the highest level of asset formation in the Indian economy since 2009.

As per economists, India has to maintain GFCF above 32 percent of GDP on a sustained basis to achieve higher growth and unleash the animal spirits of the economy.

The uptick in GFCF has been made possible by sustained high allocation towards capital expenditure by the government as well as a pick-up in private sector capex.