Indian economy is facing recession in terms of investment. There has been a decrease in investment in both public and private sectors. Although some efforts have been made by the government to promote investment in the economy, but this investment can generate limited impact. The rate of investment in the economy was 34 percent in 2011-12, down from 28.5 percent in 2016-17.
How has less investment in the economy influenced the formal sector?
Due to low investment in the economy, the number of jobs in the formal sector has decreased considerably.
Industries are facing a shortage of finance due to which they are unable to expand their business in new areas.
There is a problem of empowering the country's infrastructure by lack of investment. It is known that due to the weak position of infrastructure, attracting investors is difficult.
In the industries, the problem of Twin Balance Sheet remains intact as long as the industries will not get opportunities to spread, till then this problem cannot be solved.
How is the low investment in the economy affecting the informal sector?
According to the Economic Survey of 2018, there has been considerable reduction in private investment in the informal sector. This shortfall in investment is mainly due to a decrease in domestic savings.
According to the NSSO survey of the 73rd round, domestic savings are employed in the formal sector related enterprises, so the reduction in domestic savings affects the employment and income of the rural and agricultural sector.
This has also led to a decline in manufacturing sector. It is known that the construction sector is the highest employment provider of non-farm sector.
Decrease in household savings also affects the balance sheet of banks in negative form. It is known that the banks are already facing the problem of NPA.
Steps taken by the government to deal with this situation:
Government will have to promote government investment in the economy by taking policy intervention.
Increasing tax and non-tax revenues will reduce fiscal deficit and disinvestment of loss-making PSUs.
Regarding banks, the Indra-Nation plan will have to be strictly enforced so that adequate capital can be provided to the banks by eliminating poor loans.
Conclusion:
It can be concluded that the situation of investment in the economy is constantly falling. From this, both formal and informal areas are being negatively affected. To improve this situation, the above mentioned measures need to be implemented.
