India Budget 2019: As India reels under slowing economic growth, the government’s move to focus on investment will be key in driving growth as the 2019 Economic Survey said.
Union Budget 2019: As India reels under slowing economic growth, the government’s move to focus on investment will be key in driving growth as the 2019 Economic Survey said. It will also help in shifting the attention from the ongoing consumption crisis, ace market consultant Rama Bijapurkar wrote in The Indian Express today. There is a growing clamour from industry, think-tanks and media to prop up the slowing economic growth by boosting consumption. Various sops such as cash transfers, reduced excise duties, decreased interest rates on retail loans, among other measures, were proposed, have been mooted. India Inc leaders were approached for their advice on coping with consumption slowdown. However, “why investment has slowed down and how to revive it has not received even a fraction of the public attention that consumption has,” Rama Bijapurkar wrote.
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Why focus must be on investment, not consumption
Rama Bijapurkar has long held the view that consumption will increase once people have surplus income. “Consumption growth from the rest can’t happen unless their incomes grow,” she wrote in the newspaper. So, how to increase incomes? By ramping up infrastructure, and focusing on investments. “It is very reassuring that the Economic Survey and Union Budget … have focused on addressing the fundamental problem of increasing economic activity,” she wrote. Finance Minister Nirmala Sitharaman said in the Union Budget 2019 that the infrastructure will see a massive push. In the Economic Survey released a day before the Budget, the government also said that focus will be on “behavioural nudges” which Rama Bijapurkar described as “the life-foundation of consumer India, the goose that lays the golden egg of consumption.”
Investment and consumption growth go hand in hand
Further, infrastructure improvement and investing in human capital boost consumption over time; in fact, a “disproportionate and sustainable jump in consumption” is made with rising infrastructure levels and human capital, wrote Bijapurkar.
In India, ‘consumption slowdown’ has been making headlines for quite some time now with reports surfacing on the demand slump in auto sales and FMCG industry. Dissing the same, Bijaupurkar wrote that while media yelled “doomsday, consumption slows down”, different product categories experienced different performance level, indicating that the situation may not be as bad as imagined.