Instead, over the 1990s, private sector investment appears to have risen until 1995-96, and thereafter declined to settle at the rates observed for the late 1980s. This increase was not sufficient to offset the decline in public investment over the 1990s in terms of the unadjusted total. Instead, a substantial factor in determining the final gross capital formation figure over these two decades appears to have been in terms of errors and omissions.
 
These errors and omissions reflect the differences that emerge when reconciling the commodity flow estimates of investment with the financial flows that emerge also from the balance of payments figures. Thus they amount to domestic saving plus net capital flow from abroad minus unadjusted gross domestic capital formation. It is interesting to note that, while the errors and omissions do fluctuate to some extent as expected, there is a definite tendency to move from negative levels in the 1980s to positive levels in the 1990s. It is not clear whether this also reflects some broader tendency which is not being adequately captured in the data.
 
Chart 5 and the subsequent charts focus on the period after 1993, since the new series of National Accounts begins with base year 1993-94. Chart 5 is extremely interesting because it reveals some relatively less known aspects of the composition of capital formation. It turns out that, insofar as investment has increased over the 1990s, it has dominantly been due to the increase in household investment (which is the counterpart of household physical savings as described earlier). Private corporate investment increased only slightly and then tapered off from 1996-97, while public investment, as mentioned earlier, declined over most of the decade and only increased slightly in the last two years.

Chart 5 >> Click to Enlarge
 
This has meant that, while the public sector’s share of investment fell from 1993-94 to reach only 28 per cent by 1999-2000, the share of private corporate investment increased only marginally was at only 31 per cent at the end of the decade. By contrast, the share of  investment by private households increased from 35 per cent in 1993-94 to as much as 41 per cent by 1999-2000. It is a moot point how much of this reflects increases in what could otherwise be called luxury consumption, whether in the form of luxury housing which is classified as physical asset creation, or in the purchase of luxury vehicles which are classified as transport equipment.
 
The substantial slowdown in private corporate investment obviously reflects relatively depressed expectation regarding the of the market in the current recessionary conditions. But it also is bad news for the future, since it means that future activity and output will also be affected. The best means to reverse this would be to reverse the downward tendency of public productive investment, but that would in turn imply a substantial revision and transformation of the entire economic reform strategy of the past decade.
 
Charts 6 to 13 examine the patterns of gross capital formation and change in output by specific sectors in the period 1993-94 to 1999-2000. This obviously provides a sectorally disaggregated sense of  investment behaviour. But it also gives a broad indication of how output has moved relative to investment, in other words whether ICORs (which measure the incremental output consequent upon new investment) would have a useful applicability in this context.

Chart 6 >> Click to Enlarge