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Investment slowdown in India – an assessment

Author

Listed:
  • Sitikantha Pattanaik
  • Harendra Behera
  • Rajesh Kavediya
  • Arvind Shrivastava

Abstract

The contraction of investment activity in India in 2019-20 has generated an anxious search for possible drag factors, both cyclical and structural. This paper finds statistically significant sensitivity of investment activity in India to changes in interest rates. It highlights that the extent to which lower interest rates could be ensured through monetary policy to stimulate investment activity is bounded by constraints. Lower interest rates to spur investment activity that involves tolerance of higher inflation relative to the inflation target becomes particularly ineffective and counterproductive.

Suggested Citation

  • Sitikantha Pattanaik & Harendra Behera & Rajesh Kavediya & Arvind Shrivastava, 2022. "Investment slowdown in India – an assessment," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 15(2), pages 109-124, May.
    • Handle: RePEc:taf:macfem:v:15:y:2022:i:2:p:109-124
    DOI: 10.1080/17520843.2020.1865650
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