Challenges persist in India's growth landscape, with modest aggregate domestic demand and notable absence of private non-infrastructure business capital expenditure. While the wealthy continue to drive demand, the informal sector, especially micro, small, and medium enterprises (MSMEs), grapples with stress, particularly in rural areas. As the budget balances competing priorities, a cautious approach is warranted in addressing growth challenges and supporting sectors facing ongoing struggles.
In the ongoing fiscal year, capital spending in India has soared over 33 per cent, exceeding $120 billion, and is projected to further rise by 15 per cent in the next fiscal year. The surge in government investment has been a key driver of the country's economic growth. Economists emphasise the need for sustained improvements in India's infrastructure to stimulate private investment. However, there is a consensus that enhancing human capital through increased spending on education should be a top priority for long-term, inclusive growth.
The consensus among economists points to infrastructure investment as the top budget priority (34 respondents), followed by rural development (17) and job creation (16). Despite the need for a focus on education and healthcare, none of the economists cited these areas as the main budget priorities. The emphasis on infrastructure investment aligns with the government's goal to fuel economic expansion and revive the private investment cycle.