Key Points
Usually, all ratios investment, savings, fiscal deficit, current account balance, corporate profits, et alare measured in nominal data or at current prices..
What makes the debate very pertinent is that while the nominal investment ratio stood at about 32% of GDP each in 2021-22 and 2022-23, down from 39% of GDP in 2011-12, the real investment ratio was 36.7% of GDP in 2021-22 and 35% of GDP in 2022-23..
The overarching argument, thus, remains unchanged: even though real investments are growing at a much faster rate and the real investment ratio is higher than the nominal investment ratio, India must elevate the ratio by at least 2 percentage points to attain our target of 8% real GDP growth per annum..
Hence, a higher real investment ratio vis--vis the nominal ratio reflects an investment deflator growing at a slower pace than the GDP deflator, with consumption prices outpacing those of investment goods..
The investment deflator increased at a slower pace than the GDP deflator, irrespective of whether the global (or Indias) investment cycle was very strong (between 2003-04 and 2012-13) or weak (from 2012-13 to 2021-22). . Clearly, more work needs to be done to understand the sustained gap between Indias real and nominal investment ratios..
