Overall prospects for economic growth are constrained by lack of new investments despite major gains in industrial growth in the first half of the fiscal, according to National Council for Applied Economic Research.
To make matters worse, impact of poor kharif harvest on consumer demand will be felt in the second half of the year, the centre said.
In its latest analysis of the economy, NCAER said that cyclical components of non-oil imports, production of commercial vehicles, cement and the Sensex have declined in September as compared to their levels in the previous month.
Declining interest rates, stable exchange rate, moderate inflation rate, liberalised foreign investment regime, quieter internal security environment or even better profit earnings of corporates have failed to visibly induce new investments in production capacity, it said.
One indicator of heightened investment activity would be an upturn in capital market indicators, which is missing so far, it said adding uncertainties over the divestment programme also proved to be a disappointment for the markets.
Even the rabi harvest will affect rural demand for industrial output in the initial months of the next fiscal. Demand emanating from the rural sector will be spread out across two fiscal years.
The demand component that can offset the adverse impact of poor agricultural harvest will be the investment demand, it added.
© 2026