Union Budget 2022: Sarkari engine to drive economy – Times of India

NEW DELHI: With the economy appearing to regain speed, finance minister Nirmala Sitharaman on Tuesday decided to sustain the focus on public spending to spur economic activity and demand for inputs such as steel and cement through what is called a “multiplier effect”.
Through higher capital expenditure the government is hoping to create conditions for the private sector to start the investment cycle once it exhausts the excess capacity at its plants, a theme that was argued in the Economic Survey on Monday.

As a result, the Centre budgeted to increase capital expenditure by 24.5% to Rs 7.5 lakh crore during the next financial year, compared to a shade over Rs 6 lakh crore in the revised estimates for the current financial year. The revised estimates are roughly 8.5% higher than the budget estimates for the year.
A large part of the revised estimate for this year was on account of the capital infusion and loans of close to Rs 52,000 crore related to Air India, whose books were cleaned during the privatisation process.

Apart from the Centre’s own spending, Sitharaman also decided to increase the assistance to the states via grants in aid – through 50-year interest-free loans – for those undertaking capital investment by nearly seven times to Rs 1 lakh crore during the next financial year from the enhanced allocation of Rs 15,000 crore for this year.

Along with higher allocation for capex by railways, telecom and highways, the loans to the states, which will be in addition to normal borrowings, are the biggest contributors to the higher capital investment plan.
The biggest jump is in the case of the department of telecom, with a 10-fold increase to Rs 55,150 crore next year, driven by investments in BSNL.
Road transport and highways is also going to see a 55% increase to nearly Rs 1.9 lakh crore, partly due to direct funding from the budget instead of NHAI raising money from the markets. Similarly, railway capex is projected to increase by 17% to around Rs 1.4 lakh crore.
“The renewed emphasis on enhanced capital expenditure is in consonance with improving expenditure outcomes. They will substantially improve our infrastructure – roads; airports; railways; and logistics. This improves the competitive efficiency of our economy and boosts our export capabilities. It has an immediate multiplier effect on job creation, enhanced income and as a growth catalyst. The state governments will reap its multiplier benefits since these projects will be implemented in the states,” said Institute of Economic Growth president NK Singh.