Sitharaman announcements: View: Sitharaman’s announcements make a revival in investment…

The step up in capital expenditure to Rs 10 lakh crore, or 3.3% of GDP, should be a signal of the government’s intent to kickstart the private investment cycle that will add another engine to growth which is now being led by consumption. With this, Finance Minister Nirmala Sitharaman has nearly doubled the allocation for capex from Rs 5.9 lakh crore in 2021-22 over two years to crowd in private investment. Spending on roads, railways and ports follow a cycle that is peaking before capacity expansion by companies as consumption demand sheds the effects of the pandemic. Continuing with soft loans to states for infrastructure development ropes in the other key stakeholder in the capex game. The effective capital expenditure by the Centre, including grants to states, has risen by 64% since 2021-22. This is accompanied by a 66% jump in revenue allocation to affordable housing that should lift construction.

India is moving counter to the global business cycle that could place it in an advantageous position once demand revives. Private investment is showing signs of a pick-up where domestic consumption is robust and other sectors are likely to join the party as the budget props up disposable incomes. Import duties have been tweaked for manufacturing exports that are being pushed through production incentives. Small enterprises that are yet to see an uptick in the investment cycle are in for a beneficial tax treatment. The finance minister has tried to cover all the bases for a revival in investment. It is now a matter of when, not if.