If there is one element that stands out about the just announced Union budget it is the focus on capital expenditure and especially spending on highways and roads. Dr C Rangarajan, economist and former governor of the Reserve Bank of India, called it a major takeaway from the budget and one that indicated a directional shift in the expenditure mix of the government. Given that revenue expenditures (that do not create assets) typically form a major part of the government expenditures, the focus this time instead on higher capital expenditure, meant to create revenue-generating assets, is being considered significant and a noteworthy change. For the first time capital expenditure accounts for a high 45 per cent of the fiscal deficit. While the expenditure profile details in the budget documents do talk of spending into areas such as roads, railways and other areas of infrastructure, the key question is will it all truly end up in asset creation that can generate significant revenue or will we end up spending on prestigious projects that may not necessarily be growth enhancing? Economists and other experts in finance are also raising a much more fundamental point on the growth and development model itself? What development model is best suited for India in these times? Is a return to a commanding heights of the economy model of the 1950s wherein the government remains that huge and mega project spender and riding change banking on the traditional model of Keynesian multiplier triggered growth in the economy? Is this still relevant in times when the scale and size of private enterprise has changed significantly and the ability landscape on investments changed. After all, today there are behemoths within the private sector that can also invest huge sums without the government support. Therefore, should the government not focus instead on areas where markets fail and channelise its resources into areas that can help raise incomes and thereby consumer demand? Vinayak Chatterjee, an infrastructure expert & chairman, National Council on infrastructure of the Confederation of Indian Industry (CII) discusses these and more. He also looks closely at the enablers that the budget is banking on to attract the private sector back into the infrastructure story. Also, he discusses what it will take to see such a resurgence that could lead to an accelerated growth.
Budget’s Infrastructure push – what the numbers say
Vinayak Chatterjee, an infrastructure expert & chairman, National Council on infrastructure of the Confederation of Indian Industry (CII) discusses this and more.
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