Rein in inflation, step up capex – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/opinion/rein-in-inflation-step-up-capex/article38101982.ece

PORTRAIT

Start-ups to support investments and job creation: Start-ups in India have raised around $36 billion in 2021 as compared with $11 billion in 2020. India ranks third in the world in terms of unicorn start-ups. Thirty-three Indian start-ups attained unicorn status in 2021, taking the total to 54. Since 2016, start-ups have added more than 5.2 lakh jobs in the country, with 45 per cent of the jobs being generated in Tier-2 and 3 cities.

Housing boom: Affordable housing has been the driving force within the housing and real estate sector. Low interest rate and stimulus given by State governments coupled with a desire to own a house post the pandemic supported demand for this segment in 2021. The housing sector is likely to gain further traction in 2022 with favourable demographics, low interest rate and government push supporting the demand.

Green financing: India’s NDC (Nationally Determined Contribution) estimates that the country will require $2.5 trillion from 2015-2030 or $170 billion a year to tackle climate change. However, investments have been low. Green finance flows in India stood at $17 billion in FY17 and $21 billion in FY18 (source: Climate Policy Initiative), with the power generation sector being the primary recipient of the tracked green finance followed by sustainable transportation and energy efficiency and power transmission. There is potential/scope for higher investments in green financing and EVs.

Focus on capex to boost economic growth: Capex has a higher multiplier effect on economic output, thereby making a case for capital spending to revive growth. To recall, budget allocation on capex rose by 30 per cent to ₹5.54 trillion in FY22. Capex stood at 45.7 per cent of the budgeted estimates (BE) during April-October FY22.

The author is the Economist with HDFC Bank

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