Investments likely to increase up to 15.5 percent in 2021

Jul 16, 2020: Investment and savings for the fiscal year 2020-21 is expected to increase slightly to 15.5 percent of GDP during the fiscal year 2020-21 and help achieve sustained and inclusive growth keeping in view post corona crisis.

Fixed investment is expected to grow to 13.9 percent of GDP in 2020-21, according to official data which added that the National Savings are targeted at 13.8 percent of GDP.

During the fiscal year 2020-21, the focus would be on replacing consumption led growth with investment led growth.

The new monetary policy posture with reduction in interest rate would encourage investors and consumer financing would boost economic activity.

Numerous measures to improve ease of doing business, such as tax holiday to special economic zones, withdrawal on constricting taxes on banking transactions, are expected to boost capital formation and attract both domestic and foreign investment.

Meanwhile, during the fiscal year 2019-2020, the investment environment improved in in the country as the ranking improved by 28 notches in previous two World Bank’s Ease of Doing Business Reports.

Foreign Direct Investment (FDI) more than doubled in the first 10 months of the last fiscal year while the Foreign Direct Investment (FDI) more than doubled from net inflows of USD 1 billion to USD 2.3 billion this year.

This has helped in preventing the COVID-19 related impact to take its toll on overall investment, it added.

The downward sliding of the private investment from 10.3 percent of GDP in 2018-19 to 10 percent in 2019-20 was slightly compensated by slight increase in public sector investment to 3.8 percent of GDP from 3.7 percent last year.

The investment-to-GDP ratio declined from 15.6 percent in 2018-19 to 15.4 percent in 2019-20.

Meanwhile, the National Savings improved to 13.9 percent of GDP from 10.8 percent in 2018-19 while the country’s reliance on foreign savings decreased as marginal increase in investment is somehow compensated with increase in national savings.

Increased consumption led to subpar growth of savings, given the inverse relationship between the two.

Sustainable investment in commodity producing sectors is crucial for consistent growth. However, saving rate has been persistently lower than the required level which prevented investment to reach the level required to accelerate growth further.

Low national savings lead to increased reliance on external financing for investment, it added.

APP