THE COMING CRUNCH
Over the past year, as the Indian economy was getting mired in a deep slowdown, government expenditure grew 11.8 per cent in Q3 FY2020. Much of this was spent on building infrastructure, which created demand for cement, steel and construction businesses. The other three drivers of India’s gross domestic product (GDP) growth were on shaky territory. Private consumption expenditure rose 5.86 per cent and business investment fell 5.16 per cent while net exports dipped 1.1 per cent.
However, in the post-coronavirus world, government spending on infrastructure could be one of the biggest casualties as focus shifts to health and disaster management. But a balancing act will be required to keep the momentum going. After all, the economic impact of investing less in infrastructure is very high given its multiplier effect on economic activity and job creation. Worse, any cut in infrastructure spending will put at risk the government’s plan to make India a $5-trillion economy by 2025, for which infrastructure spending of $1.5
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