Private capex slowdown an enigma; manufacturing growth too weak for India’s jobs challenge: Rajiv Kumar

Former NITI Aayog Vice Chairman Rajiv Kumar has described the slowdown in private sector capital expenditure as an “enigma”, while warning that India’s manufacturing growth remains far too weak to address the country’s mounting jobs challenge.

Speaking to CNBC-TV18 as the Narendra Modi government nears completion of 12 years in office, Kumar said government-led infrastructure spending and reforms had improved the overall business environment, but private investment had failed to accelerate in proportion.

“Well, that's an enigma, because it's something that is not very easy to explain,” Kumar said while referring to the reluctance of the private sector to step up investments despite the government’s push on infrastructure and logistics.

“Given all that the government has done in terms of reducing logistics costs, improving physical infrastructure, and pushing up rural demand, the reluctance of the private sector to put in more money and increase capex is difficult to explain,” he added.

Kumar said one possible reason was the need for greater predictability in policymaking and improved ease of doing business at the ground level. According to him, uncertainty remains a major deterrent to investment decisions.

“My one pithy statement on this has been that the Indian state and government at all levels have to be transformed from a regulatory state into a promotional state,” he said.

“The ease of doing business, which the Prime Minister has mentioned even from the ramparts of the Red Fort, has to actually improve on the ground,” Kumar added, while stressing the role of state governments in facilitating investments.

Kumar also expressed concern over India’s manufacturing performance, saying average manufacturing growth of 3% to 3.5% over the last 12 years was inadequate for a country trying to generate large-scale employment opportunities for young people.

“Manufacturing is where the new jobs will be created and where youth unemployment will be addressed. Otherwise, the demographic dividend will go to waste,” he said.

India has long targeted raising manufacturing’s share in GDP to 25%, but it has largely remained around 16-17%, despite initiatives such as Make in India and the production-linked incentive (PLI) scheme.

Kumar argued that India needed a much sharper focus on export-led manufacturing to achieve scale and competitiveness. He pointed to the success of mobile phone manufacturing following Apple’s expansion in India as an example of what focused policy support could achieve.

“My view is that we should pick four or five of these sectors and invite anchor investors into them,” he said.

He also warned that India’s share in global merchandise trade had remained stuck at around 2%, despite the rapid rise of several Asian export-led economies over the past few decades.

“All Asian economies that have managed to break through and achieve rapid growth have done so on the basis of rapid export growth,” Kumar said.

The comments come amid a broader assessment of the Modi government’s economic legacy over the past 12 years. The period witnessed major reforms including the rollout of GST, expansion of Jan Dhan accounts, rapid growth in digital public infrastructure and a large-scale government infrastructure push.

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UPI transactions crossed ₹3,200 lakh crore in 2025, while the government’s semiconductor mission approved 12 projects with proposed investments worth ₹1.64 lakh crore.

At the same time, the government has faced criticism over the impact of demonetisation, rising youth unemployment, slow progress in manufacturing and concerns around skill development. India has also had to navigate external challenges including tariff pressures from the United States, tensions with China and efforts to build diplomatic support for Operation Sindoor.