ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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The Budget Bets on Capital Expenditure to Revive Growth

How Will This Strategy Play Out?

The budget has bet on a hard strategy of government capital expenditure-led growth. This article looks at how the massive increase in capex is planned along with continuing fiscal consolidation in the context of the budget strategy. It also discusses the receipts and expenditure budgets. Finally, it concludes after discussing the likely macroeconomic impact of the budget.

The authors are grateful to Rakesh Mohan for his comments on an earlier draft. The views expressed in this article are of the authors.

Like the previous budget, the budget for 2022–23 was also prepared under very difficult conditions. The economy is yet to recover from the unprecedented two-year long pandemic shock. There is a consensus that the economy will register robust growth in 2021–22. Approximately, 8.9% is the number in the Second Advance Estimates of National Income just released by the government. However, much of this will be due to the strong base effect of a sharp (-)6.6% gross domestic product (GDP) contraction in 2020–21. This tailwind will be missing in 2022–23.

Further, underlying the high overall growth in 2021–22, there is strong evidence of heightened distress at the base of the wealth-income pyramid among workers, the self-employed and micro, small and medium enterprises (MSMEs) in the informal sector. Distress has risen at the bottom even as net worth has grown enormously for large corporates in the organised sector and leading business families at the top, thanks to a booming stock market, the so-called K-shaped recovery.

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Updated On : 26th Mar, 2022
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