Hindi English Translation || Editorial || Capex quandary: On the economic data, policy

Capex quandary: On the economic data, policy

Private investments remain tentative amid growth concerns

Since the COVID-19 pandemic, the Centre has been using public capital expenditure (खर्च, व्यय) on infrastructure to pump prime the economic recovery. The mantra has been that infrastructure building will stoke demand for products such as cement and steel, generate jobs in construction, and together trigger (प्रेरित करना) a strong multiplier effect on the economy, eventually creating conducive (अनुकूल, सहायक) conditions for private investors to plan greenfield and brownfield projects. In Budget 2024-25, Finance Minister Nirmala Sitharaman said the government will endeavour (प्रयास) to maintain strong fiscal support for infrastructure over the next five years, in conjunction (संयोजन) with imperatives (अनिवार्य) of other priorities and fiscal consolidation (समेकन, सुदृढ़ीकरण). She announced ₹11.11 lakh crore of capex spends this year, amounting to 3.4% of GDP. That goal is unlikely to be attained partly due to spending curbs in the poll-affected first quarter. While industry has urged the Centre to continue the capex push in 2025-26 as well, it has failed to respond to the government’s constant nudges (To gently push or prod someone to take action) and persuasions (अनुनय-विनय, मनाने की क्रिया) to ramp up their own operations.

Data show that two of this year’s first three quarters have recorded a notable sequential decline in private investment plans, particularly by domestic industry. In Q1, private capex plans dropped to multi-year lows, and though the July-September quarter recorded a recovery in investment intentions, that uptick has dissipated (To scatter or disperse) in Q3. Projects Today data suggest domestic investments’ value dropped 1.4% from Q2, while new projects’ value dropped over 22% from a year ago as per the Centre for Monitoring Indian Economy. There are many factors playing on corporate risk-taking capacity — weak Q2 results, global uncertainties, spiking costs and waning demand in more lucrative (लाभदायक) urban markets. Going by current indications, including the early bird Q3 results, demand has not really improved, nor is there ostensible pressure on factory capacities to warrant expansions. For a sustainable breakout from this slowdown, private capital should take the driving seat because there are limits to enhancing public capex while maintaining fiscal rectitude (नैतिकता) and providing for myriad welfare schemes. The government must accept that exhortations to industry are unlikely to spur fresh outlays, and incentives focused on themes such as import-substitution are insufficient. Not one new rupee will be deployed if a project is unviable and demand flaky. Policy focus should remain firmly on ensuring the ground is ripe to instigate investments and easing the realisation of such plans into billowing chimneys and new jobs. For that, boosting incomes and consumption is critical as is expediting macro- and micro-level reforms. That an economic policy framework outlining next generation reforms, promised in the Budget, has not been heard of since then, is not very comforting.

Courtesy: The Hindu

Important Word List With Meaning

1.Expenditure (Noun)

Hindi Meaning - खर्च, व्यय
English Meaning - The amount of money spent on something.

2.Trigger (Verb)

Hindi Meaning - प्रेरित करना
English Meaning - To cause an event or situation to happen.

3.Conducive (Adjective)

Hindi Meaning - अनुकूल, सहायक
English Meaning - Making a situation or outcome more likely to occur.

4.Endeavour (Noun)

Hindi Meaning - प्रयास
English Meaning - An attempt to achieve a goal.

5.Conjunction (Noun)

Hindi Meaning - संयोजन
nglish Meaning - A combination of events or things occurring together.

6.Imperative (Adjective)

Hindi Meaning - अनिवार्य
English Meaning - Of vital importance; crucial.

7.Consolidation (Noun)

Hindi Meaning - समेकन, सुदृढ़ीकरण
English Meaning - The action of making something stronger or more solid.

8.Persuasion (Noun)

Hindi Meaning - अनुनय-विनय, मनाने की क्रिया
English Meaning - The act of convincing someone to do or believe something.

9.Lucrative (Adjective)

Hindi Meaning - लाभदायक
English Meaning - Producing a great deal of profit.

10.Rectitude (Noun)

Hindi Meaning - नैतिकता
English Meaning - Morally correct behavior or thinking.

11.Nudge (Verb)

English Meaning - To gently push or prod someone to take action.

12.Dissipate (Verb)

English Meaning - To scatter or disperse.