Will India see only modest increases in capex allocation now on?
During the covid-19 period, the government had to significantly increase both capital and revenue expenditure. As a result, the fiscal deficit surged to 9.2%—a level clearly unsustainable in the long term.
However, given the extraordinary circumstances, the focus was on investing in the economy through capital spending while addressing immediate revenue needs. Even state governments saw their fiscal deficits rise during this time.
Recognising the need for fiscal consolidation, the finance minister had announced a roadmap to bring the deficit below 4.5% by the financial year 2026.
Since then, the numbers have been gradually normalising. The current figures reflect a return to stability, unlike the crisis-driven spending of the pandemic era.
Is the Centre more keen on boosting consumption than crowding in private investment through capex?
The consumption story is crucial, and a weakness in demand was felt. This prompted certain tax measures to address the issue. However, the capex story remains alive. It is only that one should not expect a 25-30% year-on-year increase for a long time.
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