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India’s middle class feels aggrieved that recent Budgets have not extended any meaningful relief to them. Here is one concession that could have been considered which can bring down two birds with one stone
If there is one single number from the Union Budget that catches the eye and the imagination in equal measure, it has to be 7.5 lakh crore. That’s the proposed outlay for capital expenditure during FY23, and has gone up sharply by 35.4% from the current year’s5.54 lakh crore. It is also more than double of what was spent in 2019-20.
This bold thrust on infrastructure spending will hopefully crowd in private investment and is much needed at a time when the Indian economy is still finding its way out of the turmoil and stresses of the pandemic. One of the things that India got right in the response to the pandemic was to tilt towards capital expenditure that improves future supply as compared to revenue expenditure that stokes demand. This can be inflationary, as the US and other advanced economies are discovering now.
Further, it is perhaps not adequately appreciated how investment in infrastructure lowers overall costs in the economy and adds to the competitiveness of local industry. It creates new markets for producers and new sources of supply spring up. These results don’t appear overnight, but the effects of the extra attention to infrastructure over the last half-decade are already beginning to show in the way India’s exports have taken off in the last one year, and how GST collections are consistently exceeding expectations these days.