The commitment of an asset to increase in value over time is referred to as an investment. Investment is a crucial element as far as the growth of the economy and the well being of the country is concerned. The responsibilities of the government include making both social sector and infrastructural investments. Building factories, construction of railways, roads and other infrastructural development, purchase of new machinery and technologies, building schools and hospitals, adding to the existing stocks, all comes under investments. The topic of investment models deals with a range of sub-topics like the importance of investment, its sources, types of investment models and so on.

What is Investment?

• Investment can be understood as the act of purchase of an asset or product with the intention of generating gains in the future.
• A product purchased or money spent with an intention to invest is not always to consume but to use it to create wealth in the future.
• In economics, terms investment and capital formation are used interchangeably which in effect means the same, that is an increase in the capital stock of an economy during a given year. It refers to the portion of the country's GDP that is not consumed but instead used to expand the country's productive potential.

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Need for investment

To the extent Government of India is concerned it needs funds to realize two categories of the planned targets, namely:

• Infrastructural targets - Chiefly include power, transportation and communication; in the recent year's many other sectors got attached with it, for example, technology parks, urban infrastructure, etc.
• Social sector targets - Includes education, health, social security, etc. - known as the Human Development related targets since 2010–11. These funds get mobilized through the Plan Finance-II Division of the Ministry of Finance.

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Sources of Investment

There are mainly three sources of investing for the government. They are:

• Internal funding - Internal sources of finance refer to money that comes from within the government’s accumulated profits from its industries or businesses. Internal funding can also be made through disinvestment.
• Borrowing - The government raises money for investment either from banks or through the issue of financial assets such as bonds or Commercial Papers.
• Issuing new “equity” shares - The government can also make use of the stock markets, sell its stocks to investors and raise funds. Two common types of public equity issuance are initial public offerings (IPOs) and secondary equity offerings.

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Types of Investment Models

There are different categories of types of investment models. However, a major categorization is based on who invests in asset creation:

• Public Investment Model: For a government to invest, it needs revenue, but India's current tax receipts are insufficient to satisfy the country's budgetary expenditure. As a result, India cannot progress down the path of growth without the participation of private individuals; even the government requires tax income from private investors to participate in the investment.
• Private Investment Model: Private investment can originate from India or from other countries. If they come from another country, they can be classified as FDI or FPI.
• PPP Model: PPP stands for Public-Private Partnership, and it refers to combining the best of both public and private initiatives. The following are the different types and models of PPP Schemes and their modalities:

Based on where the money comes from, investments are categorized into two:

• Domestic Investment Model: When the investment source is strictly within the country. It can be in a Public, Private or PPP model.
• Foreign Investment Model: When there is an investment involved from a foreign source it is Foreign Investment Model. It can either be 100% Foreign Direct Investment or Foreign-Domestic Mixed model.

Investment Models used in India

• Harrod Domar Model: According to the model, economic growth is dependent on policies that boost investment by boosting savings and putting that money to better use through technological advancements. It implies that there is no natural need for an economy's growth to be balanced.
• Solow Swan Model: The neo-classical model was a follow-up to the Harrod–Domar model of 1946, with the addition of a new term 'productivity growth' which refers to an increase in the value of outputs produced for a given level of inputs
• Feldman–Mahalanobis model: This strategy focuses on increasing the domestic consumer goods sector where capital goods have sufficient capacity. It later evolved into the Nehru-Mahalanobis model, which is a four-sector model.
• Rao Manmohan Model: This model, named after Narasimha Rao and Dr. Manmohan Singh, is based on the 1999 economic liberalisation and FDI policies. It had its key motivation from the Lewis Model Economic development which is based on a limitless labour supply.

Conclusion

Investments play a crucial role in the growth of the country. It enables capital creation, generation of jobs, which in turn generates income, which boosts the economy as a whole. India is currently focused on an investment model driven by private players. Though foreign investments cannot be promoted much since India’s Current Account Deficit is widening due to increased Oil Imports, private investments have played a crucial role in the country.