Investments were also helped by a rise in the capacity utilisation rate of businesses (based upon RBI’s capacity utilization survey) from 73.1 per cent in 2017-18 (annual average) to 75.9 per cent in Q3 of 2018-19. These numbers, which are based on a sample of companies, are however a bit difficult to reconcile with the low Index of Industrial Production (IIP) growth witnessed during the year. “A rise in capacity utilisation prompts fresh investments. Investments have been tended to be sustained by higher government/public spending. Private investment continues to be restrained primarily on account of lower demand and financial constraints. Political uncertainty has also been a factor that limited private investments during the last two months”, the report added.
The domestic economic growth output with GDP growth, according to advanced estimates by Central Statistical Organisation (CSO) is pegged at 7 per cent, implying a five-year low.
The study ascribes the moderate growth to weakness in consumption demand and continued subdued private investment activity. Private consumption, which has been the mainstay of the Indian economy, has been impacted by prolonged periods of low income growth coupled with the liquidity issue in the aftermath of the NBFC crisis from Q2FY19 onwards which constrained availability of funds for producers, as well as, consumers. Economic growth during the year was supported partly by exports and higher government spending towards infrastructure building.