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LATEST NEWS UPDATES | Budget 2021-22: Over-reliance on infrastructure investment to spur growth? -Sarmistha Pal

Budget 2021-22: Over-reliance on infrastructure investment to spur growth? -Sarmistha Pal

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published Published on Feb 5, 2021   modified Modified on Feb 26, 2021

-IdeasforIndia.in

Commenting on the strong infrastructure push in the 2021-22 Budget, Sarmistha Pal argues that an emphasis on investment in infrastructure may not necessarily bring India out of the current economic recession – with the Budget’s negligence of the education sector and insufficient health expenditure, making matters worse.

The 2021-22 Union Budget, announced on 1 February 2021, made a definitive turn to the right as it turned its back on providing any direct fiscal stimulus. Instead, it focussed heavily on investment in infrastructure to bring the Indian economy out of the current recession. After experiencing faltering growth since 2016, India’s GDP (gross domestic product) growth rate hit -10.3% in October 2020 (as per IMF’s (International Monetary Fund) World Economic Outlook), making India among the worst-hit emerging economies in the Covid-19 crisis. Instead of boosting the shrinking aggregate consumption demand or private investment in the economy, the Modi government’s new budget seems to be driven by the belief that supply creates its own demand. This is, however, not guaranteed – in the presence of deficient aggregate demand, all income earned from producing output is not necessarily used to purchase it.

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IdeasforIndia.in, 5 February, 2021, https://www.ideasforindia.in/topics/macroeconomics/budget-2021-22-over-reliance-on-infrastructure-investment-to-spur-growth.html


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