Archive · 30 Dec 2025
Economists Debate Investment Strategies for India's Growth
Dr C Rangarajan, a famous economist, says India needs to increase its investment rate to 35% of its GDP to become a developed country by 2047.
Right now, it's at 33.6%.
He thinks the government should keep spending on big projects until private companies start investing more.
He also says we need to look at each industry to see why some aren't investing enough.
Other economists, however, think the government should spend less on big projects to make sure private companies have enough money to invest.
They are worried that if the government spends too much, it might make it harder for private companies to borrow money.
The government is also investing a lot in AI, which they think will help the economy grow by $1.7 trillion by 2035.
AI will help in many areas like healthcare, farming, and education.
Dr C Rangarajan advocates for raising India's investment rate to 35% of GDP, a 2% increase from the current rate.
Some economists suggest lowering government capital expenditure to 3% of GDP to avoid crowding out private investment.
The current investment rate (GFCFR) has been stable at around 33.6% of GDP in recent years.
Economists emphasize the need for detailed analysis of sector-specific investment issues to boost private investment.
The government is investing in AI through the IndiaAI Mission, aiming to add $1.7 trillion to the economy by 2035.
- Who
- Dr C Rangarajan, former RBI governor and economist; other economists including Ashok K Bhattacharya, N R Bhanumurthy, Rajani Sinha, Madan Sabnavis, Dharmakirti Joshi, Rahul Bajoria, and Monika Halan
- What
- Advocating for raising India's investment rate to 35% of GDP and debating government capital expenditure strategies
- When
- For the next two decades, aiming for 2047
- Where
- India
- Why
- To achieve developed nation status with consistent 7-8% annual GDP growth and to avoid crowding out private investment
- Current Investment Rate
- 33.6% of GDP (2022-23)
- Target Investment Rate
- 35% of GDP
- ICOR
- 5
- GDP Growth Target
- 7-8% annually for 20 years
- Manufacturing Share in GDP
- 17%
- Services Sector Growth Impact
- Reduces manufacturing share in GDP
- Government Capital Expenditure
- Needs to continue until private investment picks up
- Budget FY 2025-26 Capital Expenditure
- ₹11.21 lakh crore (3.1% of GDP)
- Effective Capital Expenditure FY 2025-26
- ₹15.48 lakh crore (4.3% of GDP)
- IndiaAI Mission Funding
- ₹10,300 crore over five years
- AI Talent Pool by 2027
- 12.5 lakh professionals
- AI's Economic Impact by 2035
- $1.7 trillion
Sources
2026 & beyond: Dr Rangarajan for 2 % rise in investment rate with a firmer grip on sector-specific linkages
Economists pitch for recalibrating public capex to avoid crowding out of private investment
