The government has a tough job at hand in trying to revive the economy as private investment in the infrastructure sector has been on the decline for the past several years. The incremental increase in the budgetary allocations every fiscal for the sector, however, is too little to cheer, considering the fact that we are aiming at a US$ 5 trillion economy by 2025. This article discusses the systemic problems plaguing different sectors that need urgent attention and course corrections.
Lt Col Anil Raj
The National Infrastructure Pipeline (NIP) recently launched by the government envisages an expenditure of around ₹100 lakh crore for the period 2020–25, towards achieving the targeted GDP of US$ 5 trillion by 2025. The fact that the fixed investment rate has been on the decline since 2011, however, makes the target seem like a tall order. And increasing the budgetary allocations exponentially to meet the gap in funding is definitely a challenge to the government, given the low tax to GDP ratio.
As per the Economic Survey 2019–20, as the fixed investment rate increases, the GDP increases and so does the consumption. In the case of India, usually there is a lag of 3–4 years for the impact of this increase to be seen on the GDP growth. Similarly, there is a further lag of 1 to 2 years to see the impact on the growth of consumption as a result of the GDP growth. As per the National Statistical Office data, the fixed investment rate has been on the decline since 2011–12 and has stabilised and showing an upward trend from 2016–17 onwards. It means that the GDP growth corresponding to the increase in the investment rate will manifest somewhere in 2021–22.
The author is a former intern of CPPR while pursuing his MBA (Infrastructure Management) from the University of Petroleum and Energy Studies, Dehradun. Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research