While most remain focussed on how consumption continues to grow, the real driver of GDP growth is investment. Till 2001-02, private final consumption expenditure (PFCE) accounted for more than half the GDP growth each year. It fell below half in 2002-03, but rebounded in 2003-04 when PFCE accounted for 6.8 percentage points of the total 12.5 percentage point growth in nominal GDP. For the first time in 2004-05, investment became the bigger driver. Of the nominal GDP growth of 13.1 percentage points in 2004-05, PFCE accounted for 5.8 percentage points (44 per cent of growth) while investment accounted for 7.6 percentage points (58 per cent of the growth impulse). In 2005-06, while PFCE accounted for 45 per cent of the growth, investment accounted for half the overall growth. While the actuals for 2006-07 are yet to be released, the increased trend is obvious given how just FDI, as a proportion of GDP, is likely to touch 1.9 per cent in 2006-07, a figure double that for the previous year "" at $3.8 bn for March 2006-07, the FDI figure is equal to what came in during the whole year just a few years ago.
