- Feb 3, 2025, 20:52 IST IST
Capex certainly has a bigger multiplier effect, but by revving up consumer spending with tax cuts, this budget takes a double-engine approach to beat the slowdown
Investment powered India’s recovery after the pandemic. Household and public investments led the way while the corporate sector played a waiting game. So, why has govt eased up on capex this budget? North Block had the onerous task of picking areas that can be spurred in times of subdued growth and heightened global uncertainty. By reducing tax incidence for middle class and initiating regulatory reforms to encourage private investment, it has ticked some of the right boxes.
Capex was slowing anyway | Building physical infra via budgetary spending has a higher multiplier effect on the economy than consumer spending, so it raises medium-term growth potential. While Centre’s capex outpaced nominal GDP growth (10%) for the last few years, now it is aligning both. This fiscal, it will spend 8.3% less than what has been budgeted. Capex fell short of goals in fiscal 2024 also.
