Creation of public assets low, says CII

Even as private sector gross capital formation (GCF) as a percentage of the gross domestic product (GDP) has risen from 13.1 per cent in 1991-92 to 17.1 per cent in 2002-03, it has fallen from 8.8 per cent to 5.7 per cent in the public sector in the same period, according to a Confederation of Indian Industry (CII) paper on the investment scenario in India.

The paper also pointed out that the share of public sector investment in industry has fallen from 33 per cent in 1993-94 to 23 per cent in 2000-01 and its share of investment in agriculture has come down from 32 per cent to 23 per cent during the same period. Electricity, gas and water supply were the only sectors where there was a rise in the share of public sector investment in GCF, the paper said.

The share of agriculture in GDP is around 24 per cent. However, the share of agriculture in GCF was only 8.7 per cent in 2001-02 and investment in agriculture as a percentage of GDP was as low as 1.7 per cent in the same fiscal.

The paper asserts that there is a need for higher investment in agriculture with a proper review of policies that have led to the diversion of scarce resources from the creation of productive assets.

The problem of low investment could be addressed through increased savings, it said. At present, the savings rate is 23 per cent and the problem is further compounded by the combined fiscal deficit of the Centre and the states, the paper adds.

It also said in order to bridge the expected resource gap, it was necessary to raise funds from external sources and boost domestic savings.

On the overall industrial investment intentions, the paper points out to the dismal rate of conversion of investment proposals, a mere 16 per cent. It calls for more investment in sectors like drugs and pharma for increasing India's share in the global market.

The paper also calls for infrastructure development, which is necessary to attract higher levels of investment, both domestic and foreign, and suggests promoting public-private partnerships for upgrading infrastructure.