‘Public expenditure will lead to crowding in private investments’
The Union Budget for 2022-23 has been hailed for looking at long-term, sustainable growth, where the government has focussed on capex to revive the economy. Finance Minister Nirmala Sitharaman, in a freewheeling chat with Business Today’s Rahul Kanwal, Sourav Majumdar, Udayan Mukherjee, Siddharth Zarabi and Aabha Bakaya, spells out why she took the capex expansion path and why the reduced disinvestment target doesn’t mean the government is less enthusiastic about privatisation. Edited excerpts:
KANWAL: Some economists said the need was immediate [relief]… when you should have been pumping up your revenue expenditure to provide succour to people, you’re choosing to look out into the future [by focussing on capital expenditure]. By then some of those people would have drowned economically. How do you respond to this?
A: I’m actually providing a certain continuity from last year’s Budget… something I’d like to reinforce because some critical policy prescriptions were made last year. [For example], privatisation, the policy for public enterprises, the opening up of all sectors for private participation—inclusive of space and atomic energy… So, that Budget with a blueprint for the next decade or so continues. With the second wave and Omicron, that Budget which came with some prescriptions last year, we are reinforcing that formula… the formula is public investment in infrastructure building—that is capital expenditure.
It is well established and data proves that for every rupee that you spend in capital expenditure, the multiplier is about 2.9-2.95. Whereas if you go through the revenue route and give some money in people’s hands, then it has a multiplier of just around 0.95. These numbers can be questioned, but they can’t be very different. So, would it not be, therefore, right for me to continue with that which had started last year in investing in public infrastructure with public
