State Bank of India’s Economic Research Department’s report, SBI Ecowrap, has revealed that the Gross Capital Formation (GCF) by the government touched record high of 11.8 per cent in 2021-22 from 10.7 per cent in 2020-21. This growth had positively affected private sector investment which increased from 10 to 10.8 per cent in the same period of time, as per a Mint report.
Due to the weightage given to capital expenditure in recent budgets, the GCF to gross output ratio for public administration ratio reached a new height in 2021-22.
In 2021-22, gross savings have seen a rise of 30 per cent versus 29 per cent in 2020-21. The ratio should have surpassed 31% in 2022–23, marking its highest level since 2018–19.
In the pandemic period the household savings had expanded significantly due to the rapid growth in financial savings such as deposits. Savings in physical assets have grown substantially since pandemic increasing from 10.7 per cent in 2020-21 to 11.8 per cent in 2021-22. However, the household financial savings have been declining from 15.4 per cent in 2020–21 to 11.1 per cent in 2022–23.
The research also shows that Incremental Capital Output Ratio (ICOR), which is a parameter to measure additional unit of capital (investment) needed to produce extra unit of output, has been increasing.