Rajiv Kumar urges continued capex focus in the upcoming interim budget

Capex in focus: Economist and former NITI Aayog vice chairman Rajiv Kumar advocates for sustained emphasis on capital expenditure in the upcoming interim budget to address persistently weak private investment and bridge the infrastructure gap afflicting the economy.

Kumar highlights the positive impact of increased capital expenditure during the Modi government's tenure, leading to enhanced infrastructure quality and global competitiveness for industries. In an interview with PTI, he stresses the need for ongoing efforts to overcome the infrastructure deficit and high logistics costs through increased public capital expenditure.

Attributing fiscal consolidation achievements to rising indirect tax revenues and a broadening direct tax base, Kumar foresees the continuation of the capital expenditure thrust. The improvement in the tax-to-GDP ratio, he notes, will enable the finance minister to maintain the fiscal consolidation glide path set last year.

Anticipating the upcoming interim budget theme to revolve around investment and fiscal consolidation, Kumar envisions Finance Minister Nirmala Sitharaman presenting a budget focused on meeting April-July period expenses before the Lok Sabha elections.

Potential pickup in private investments

While acknowledging the potential pickup in private investment going forward, Kumar suggests that it will alleviate the government's pressure to further increase capital expenditure.

In discussing last year's budget speech, where Sitharaman announced a 33 per cent hike in capital expenditure for infrastructure development, Kumar emphasised the importance of sticking to the medium-term fiscal deficit target. He suggests that asset monetization and public sector enterprise privatisation programmes need attention to achieve fiscal consolidation.

Looking ahead, Kumar asserts that the government's domestic capex push and demand will sustain economic growth at around 7 per cent even in 2024–25. Addressing concerns about youth unemployment, he acknowledges the gap between GDP growth and consumption demand, emphasising the need to tackle rising inequality and strengthen household demand. The latest government data projects the economy to grow by 7.3 per cent in 2023–24.

(with PTI inputs)