NITI Aayog Vice Chairman Ashok Kumar Lahiri on Friday said India must significantly increase its investment rate to sustain its growth momentum, stressing that investment is as important as consumption in generating demand and driving economic growth.
Speaking at the launch of NITI Aayog's Investment Friendliness Index for states, Lahiri said that while India has emerged as the world's fastest-growing major economy in recent years, much more needs to be done to accelerate growth.
"Are we going to be happy about that? Yes, because that's an achievement. But we know there is a long way to go because the Prime Minister has given the Viksit Bharat target, and achieving that target by 2047 requires a lot of effort," he said.
Lahiri noted that India's investment rate is around 25% of GDP, which is considerably lower than what China invested during its high-growth phase.
"When China was growing very fast, it was investing almost double that amount," he said, adding that although India has been using capital relatively efficiently, higher investments are indispensable for sustaining rapid economic growth.
Drawing attention to the relationship between investments and economic activity, Lahiri said investments themselves create demand and income in the economy.
"Many times people say increase consumption to boost demand. But it is not only consumption that creates demand. Even investment creates demand. When you invest, you buy machines that have been produced by some people, they get income and spend. When you build a bridge, the bridge builders get money and spend," he said.
Meanwhile, in the inaugural Investment Friendliness Index, Gujarat, Maharashtra, Tamil Nadu, Goa, and Odisha have emerged as the top performers. In addition, 15 States have been classified as frontrunners, while eight States/UTs have been placed in each Emerging Performers and Aspiring States categories.
Among the Large States, Gujarat secured the first rank, followed by Maharashtra and Tamil Nadu, which are also the top three performers in the overall Index. In the Hilly and North-Eastern States category, Uttarakhand emerged as the highest-ranked State, followed by Assam and Himachal Pradesh. Among the City States and Union Territories, Goa secured the top position, followed by Delhi and Chandigarh.
On the Investment Friendliness Index, the vice-chairman said that the Index is not a ranking exercise or a competition among states, but a tool to help them identify areas where policy interventions are needed to improve their investment climate.
"This is not a horse race where we have put the states and said let's check who is doing the best. It is an exercise to tell the states where they are doing well and where they can improve," he said.
