Investment must come primarily from the government at this juncture. The private sector is, indeed, preparing for demand revival, but would firm up and expand their plans, were it to see determined effort by the government to make good on its budgeted expenditure and to crystallise additional investment in key infrastructure.
The economy shows incipient recovery, going by the Nomura India Business Resumption Index, a weekly tracker of economic activity normalisation. The index, comprising mobility, power demand and labour force participation rates, rose to a record 99.4 for the week ended August 8, from 94 last week, near the pre-pandemic level (100) and surpassing the pre-second wave peak of 99.3 in mid-February. The economy is rebounding faster from the second wave than from the first. The trend must be consolidated with stepped up government spending. Investment in infrastructure will help revive businesses, restore jobs and create new ones.
Investment must come primarily from the government at this juncture. The private sector is, indeed, preparing for demand revival, but would firm up and expand their plans, were it to see determined effort by the government to make good on its budgeted expenditure and to crystallise additional investment in key infrastructure. Credit growth since the beginning of the financial year has been negative. While RBI is bravely continuing with its accommodative monetary policy and injecting liquidity into the system through assorted windows, banks prefer to keep their money with RBI, rather than actively scout for lending opportunities in the economy. The daily absorption of liquidity through the reverse repo window touched ₹8.5 lakh crore in August, said the recent Monetary Policy Statement, up from ₹5.7 lakh crore in June. An increase in business or clear indication of such increase is what companies need to start seeking credit to expand activity. For that, the government has to spend.
The total budgeted expenditure in 2021-22 is ₹34,83,236 crore, that on capital account, ₹5,54,236 crore. The Controller General of Accounts says that capital spending was 20.1% of the budget estimate during April-June, lower than the 21.4% last fiscal. Of total expenditure, only 23.6% of the budgeted amount has been spent in Q1, lower than the 26.8% managed last fiscal. The government must spend more and spend faster.