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Massive Capex Outlay To Crowd in Private Investment By Creating Demand, Boosting Eco Activity: Fin Secy


The government's massive capital spending programme outlined in the Budget 2022 will help crowd-in private investment by reinvigorating economic activities and creating demand, Finance Secretary T V Somanathan said. Finance Minister Nirmala Sitharaman raised capital expenditure (capex) by 35.4 per cent for the financial year 2022-23 to Rs 7.5 lakh crore to continue the public investment-led recovery of the pandemic-battered economy. The capex this year is pegged at Rs 5.5 lakh crore.

Massive Capex Outlay To Crowd in Private Investment By Creating Demand

The spending on building multimodal logistics parks, metro systems, highways, and trains is expected to create demand for the private sector as all the projects are to be implemented through contractors. In an interview to PTI, Somanathan said over the last two years physical restrictions due to Covid pandemic has dented demand and delayed private investment. "The hope is that because of the heavy capital expenditure programme by the end of this financial year, hopefully, private capital investments will begin to come in a big way.

That is our hope," Somanathan said.. Low private investment is a non-economic problem, which can't be solved by economic remedies, he said, adding it would be solved when activities start and demand picks up. The economic Survey has pegged India's economic growth between 8-8.5 per cent in the current fiscal, while Budget has estimated nominal GDP growth of 11.1 per cent.

In her post Budget interaction with industry leaders, Finance Minister Nirmala Sitharaman had on Saturday exhorted India Inc to take advantage of announcements made in Budget and "quickly" step up spending. Stating that government capex was increased in the Budget with twin objectives of supporting sustained growth and crowd in private investment, the minister asserted that this is the right time for investment and industry should not lose this opportunity.

Explaining the rationale for a conservative nominal GDP growth, Somanathan said the weighted average of wholesale and retail prices has been taken into account to arrive at the 11-12 per cent range. It is expected that wholesale price inflation will be lower in the next fiscal, mainly due to high base. Nominal GDP is arrived at by adding GDP deflator to the estimated real economic growth. "Wholesale prices in the current year have been rising much faster than the CPI. Normally those trends next year we will probably see WPI lower than the CPI because of the high base effect. In that case the deflator would be 3-4 per cent.


We have put nominal GDP in the 11-12 per cent range. We have taken the conservative lower rate (of 8 per cent real GDP growth). But if the deflator is higher, nominal growth would be higher," he said.


Read more about: capex investment budget 2022
Story first published: Sunday, February 6, 2022, 15:47 [IST]
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