An economic puzzle of the Modi years : the hype is not followed by investment

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Prime Minister Modi declared a successful economic recovery post-Covid. A number of international agencies have dubbed India the fastest-growing economy. India has eliminated extreme poverty (below a dollar a day), a cause for celebration (while noting that defining “extreme poverty” as living on less than a dollar a day is what Lant Pritchett would call setting the bar so low it’s practically a trip hazard). PM Modi seems to be the most popular national leader in the world and is expected to sweep the polls this year. Everyone seems to be bullish on India. Except…well, Indians.While there is no shortage of industrialists praising the Modi government and its economic policies, as a community, they don’t seem to be putting their money where their mouth is. Their reluctance to invest in longer-term plans paints a different picture, one of caution rather than celebration. How can I generalize across all businesses and sectors, you may ask. Have I engaged deeply with businessmen in India? Am I just another foreign-trained economist, criticizing Modi, being true to my tribe? Haven’t I heard the businessmen, in India and the world over, praising Modi? I have also seen the numbers for Gross Fixed Capital Formation.Low Gross Fixed Capital FormationEconomists care about what people do more than what people say. One way to compare how businesses and investors perceive the economic environment is by tracking Gross Fixed Capital Formation (GFCF), a fancy term for the total amount a country – individuals, firms, government – spends on long-lasting stuff. Think buildings, machines, and t…