Autonomous Investment

Autonomous investment is a type of investment that is not dependent on economic conditions, such as changes in income or GDP. It is a portion of total investment made by a government or other institution that is independent of economic considerations. Autonomous investment is different from induced investment, which is investment that varies with changes in the level of income or economic activity.
Mutual funds help balance stability and growth for your portfolio
3 min
26-August-2025

When we think of investments, most of us imagine people or businesses putting money into something expecting profits. But not every investment works this way. Some investments happen no matter how the economy is performing, even if profits are not the goal. These are called autonomous investments.

Such investments are usually made by governments or big institutions, often for projects that keep the country running and people’s lives better. Think of roads, electricity, water supply, or healthcare facilities—things that benefit everyone whether the economy is booming or struggling. Just like governments use autonomous investments to build long-term stability, you too can channel small, regular contributions into mutual funds and steadily create wealth over time. Start Investing or SIP with Just Rs. 100!

In this article, we will break down what autonomous investment really means, why it is important, its examples, and how it helps create long-term stability for an economy.

What is an autonomous investment?

Autonomous investment refers to the part of total investment that does not depend on the current state of the economy. In other words, it continues regardless of whether national income or GDP is rising, falling, or staying the same.

These investments are usually carried out by governments or large organisations with the aim of ensuring:

  • Continuous growth of essential services
  • Development of critical infrastructure

For example, even in times of recession, governments still need to invest in public utilities like electricity supply, schools, hospitals, or transport facilities. These projects are not profit-driven but need to be carried out to keep society functioning. In the same way, mutual funds let individuals make systematic investments that are not dependent on timing the market, helping them pursue their long-term financial goals with discipline. Compare Mutual Fund Options Now!

Understanding autonomous investment in detail

Autonomous investments are vital because they are linked to public welfare and long-term progress rather than short-term profits. Their key characteristic is stability—they happen even during tough times when other kinds of investments may slow down.

Here are some examples of autonomous investments made by governments:

  • Building and maintaining roads, bridges, and railways
  • Welfare schemes such as housing or sanitation programs
  • Stimulus packages during economic downturns
  • Public services like electricity, clean water, and healthcare facilities

These investments are often funded through taxpayer money, since they are for the collective benefit of society. For instance, the Swachh Bharat Abhiyan improved sanitation facilities across India, not for profit, but for improving health and quality of life.

Example of autonomous investment

To better understand, let’s look at some real-world cases of autonomous investment in India:

Autonomous investment examples

Launch year

Primary objective

Pradhan Mantri Gram Sadak Yojana (PMGSY)

2000

Improve rural road connectivity across the nation

Swachh Bharat Abhiyan (Clean India Mission)

2014

Promote cleanliness and sanitation for public health

Make in India

2014

Encourage domestic manufacturing and attract foreign investment

Smart Cities Mission

2015

Develop 100 smart cities with modern infrastructure and technology


Formula of autonomous investment

Autonomous investment is treated as a fixed level of investment in an economy, meaning it does not change with income or output. Economists represent it mathematically in the aggregate expenditure model.

The formula is:

AE = c + bY

Where:

  • AE = Aggregate expenditure (total spending in the economy)
  • c = Autonomous investment (spending independent of income)
  • Y = Real GDP or national income (total output of the economy)
  • b = Marginal Propensity to Consume (MPC), which shows how much consumption changes with income

Example:

Suppose the government commits Rs. 2,00,000 crore to infrastructure projects like rural electrification and sanitation facilities.

  • MPC = 0.75 (for every extra rupee earned, 75 paise is spent)
  • GDP (Y) = Rs. 2,00,00,000 crore

Here, c remains fixed at Rs. 2,00,000 crore. This shows that even if GDP changes, the autonomous investment will remain constant—it is unaffected by short-term economic fluctuations.

Why does autonomous investment matter?

Autonomous investment is critical for both the economy and society. Here’s why:

  1. Economic stability
    These investments keep spending steady even during downturns. By supporting aggregate demand, they prevent the economy from collapsing during recessions.

  2. Long-term growth
    They fund infrastructure projects like highways, power plants, and railways, which form the backbone of future private and public sector growth.

  3. Public welfare
    Autonomous investments are often directed towards education, healthcare, sanitation, and transport. By improving access to these services, they enhance citizens’ quality of life.

Just as these investments create resilience and stability for an economy, consistent mutual fund investing helps you build financial security over time, regardless of short-term market movements. Explore Top-Performing Mutual Funds!

How do autonomous investments influence aggregate demand?

One of the biggest roles of autonomous investment is in keeping demand stable. Even when the economy slows down, these investments ensure money continues to flow through the system.

Here’s how it works:

  • Stable demand: Because autonomous investment doesn’t depend on income levels, it continues regardless of recessions or booms. This helps balance out extreme cycles.

  • Multiplier effect: Money spent on projects like digital infrastructure or highways circulates through the economy multiple times. For example, a Rs. 15,000 crore government project not only creates jobs for construction workers but also increases demand for raw materials, boosts suppliers’ businesses, and generates wages that are later spent on goods and services.

  • Ripple benefits: The spending doesn’t stop with one round. Workers and firms receiving this money reinvest or spend it, creating additional layers of demand.

Why is autonomous investment essential?

Autonomous investments serve as the backbone of a nation’s development. Unlike profit-driven investments, they are made to ensure long-term stability and equal access.

  1. Infrastructure development
    Roads, bridges, public transport, and power grids create a foundation for future private sector growth and productivity.

  2. Reducing inequality
    These investments ensure underserved and marginalised communities have access to education, healthcare, and housing—helping to narrow the gap between different sections of society.

  3. Crisis management
    During times of crisis—whether it’s a recession, pandemic, or natural disaster—autonomous investments act as stabilisers. They pump funds into the economy, creating jobs and preventing deeper downturns.

Factors affecting autonomous investment

Although these investments are independent of national income, certain factors still influence their scale and direction. The three most prominent ones are:

  1. Government policies
    Policy decisions have the largest impact. Spending on transport networks, energy facilities, and research institutions often originates from government initiatives to strengthen the economy.

  2. Social and environmental priorities
    Rising awareness about issues like climate change, renewable energy, and poverty alleviation encourages governments to channel funds into clean energy, sustainable practices, and welfare schemes.

  3. National security and defence
    Defence infrastructure, cybersecurity projects, and military technology are also major drivers. While they ensure safety, they also generate employment and push technological development.

Autonomous investment vs. induced investment

To really understand autonomous investment, it helps to compare it with induced investment.

  • Response to the economy: Induced investment rises when the economy is growing and falls when it slows down. Autonomous investment, on the other hand, continues regardless of economic conditions.

  • Motive: Induced investment is usually profit-driven, made by businesses when demand is high. Autonomous investment is welfare-driven, focused on public goods like education, health, and infrastructure.

  • Nature: Induced investment can fluctuate sharply and sometimes increase volatility. Autonomous investment provides stability, acting as a counterbalance when the private sector pulls back.

Is autonomous investment the same as constant investment?

Yes, autonomous investment is often referred to as constant investment because it doesn’t change with income or GDP levels.

  • Whether the economy is expanding or contracting, autonomous investment remains steady.
  • This consistency makes it different from other types of investments, which usually react to changes in the market.

Mathematically:
Autonomous Investment = Constant Investment

This simple equation captures its essence—a stable, non-fluctuating contribution to the economy.

Conclusion

Autonomous investments are the unsung pillars of growth. By funding infrastructure, public services, and social welfare, they create long-lasting benefits for both citizens and the economy.

  • For governments, they are tools to stabilise and support growth.
  • For citizens, they provide essential services like roads, schools, hospitals, and housing.
  • For the economy, they trigger the multiplier effect, generating jobs, boosting demand, and paving the way for private sector expansion.

While induced investments may fluctuate with market cycles, autonomous investments bring the consistency and resilience needed to keep an economy balanced. They are not just about short-term returns but about laying the groundwork for long-term prosperity. In the same way, your financial growth depends on steady, disciplined investing rather than chasing short-term market moves mutual funds let you build resilience and long-term wealth. Start Investing with Just Rs. 100!

Are you looking to accumulate wealth by investing in mutual funds? The Bajaj Finserv Platform has listed 1,000+ mutual fund schemes. You can also begin by making SIP investments. Check how much you can accumulate using the free SIP calculator.

Essential tools for all mutual fund investors

Mutual Fund Calculator

Lumpsum Investment Calculator

Step Up SIP Calculator

HDFC SIP Calculator

SBI SIP Calculator

Groww SIP Calculator

Axis SIP Calculator

ICICI SIP Calculator

LIC SIP Calculator

Nippon India SIP Calculator

Kotak Bank SIP Calculator

Motilal Oswal Mutual Fund SIP Calculator

Frequently asked questions

What is the difference between autonomous and induced development?
Autonomous investment occurs independently of economic conditions, while changes in income levels and economic activity drive induced development.

What is an example of autonomous expenditure?
An example of autonomous expenditure is government spending on infrastructure projects, say Pradhan Mantri Gram Sadak Yojana (PMGSY).
What is autonomous funding?
Autonomous funding is financial support provided independently of current economic conditions or revenue levels.
Why does the government spend on autonomous investment?
The government spends on autonomous investment to stimulate economic growth and provide essential services to its citizens.
Can autonomous investment be zero?
No, autonomous investment cannot be zero as it represents baseline investment irrespective of income levels.
Show More Show Less

Bajaj Finserv app for all your financial needs and goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

  • Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
  • Invest in fixed deposits and mutual funds on the app.
  • Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
  • Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
  • Apply for Insta EMI Card and get a pre-qualified limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on Easy EMIs.
  • Shop from over 100+ brand partners that offer a diverse range of products and services.
  • Use specialised tools like EMI calculators, SIP Calculators
  • Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.