Budget Snapshots | Government capex will not move the needle in FY20
The government has little firepower left to kickstart investment. Instead, it needs to give incentives to the private sector to increase capex
June 24, 2019 / 09:48 PM IST
Capital expenditure by the central government is too little to be of consequence to the economy. As the chart shows, it was just 1.67 percent of GDP in 2018-19, the same level it was at in 2013-14. It used to be much higher in the early years of the century, as the chart indicates, but since then governments have relied on funding their infrastructure through banks, which has been a disastrous policy, as far as the banks are concerned.
What is also interesting is that total capital expenditure of the government, including through the public sector by way of internal and external budgetary resources (IEBR) was budgeted at a lower level in the FY20 interim budget than the revised estimates for FY19. Where then is the question of the government kickstarting investment demand?
What’s needed instead are incentives for the private sector to increase capex.