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Growth on track, but structural recovery awaits investment push.

Almost all indicators now point to a quicker-than-expected recovery with the economy tipped to grow at 10.5-11 per cent in FY22. Consumer confidence is rising, even as infections fall and the vaccination drive intensifies. The services sector — tourism, transport, travel hospitality and entertainment — have all been badly hit; and it’s critical for the survival of thousands of small enterprises.

Unfortunately, though, this is a cyclical recovery and will not take us too far. A strong structural recovery is some time away and will take root only once there is a big investment push. However, private sector investments are expected to remain weak for at least two more years with a deficit of demand and a surplus of capacity.

While the government’s budgeted capex for the next fiscal is around 26 per cent higher at Rs 5.5 lakh crore, the increase in the total outlay (including PSUs funded via intra- and extra-budgetary resources) is just 4.5 per cent; seen over FY20 too, it is a modest increase of 8.7 per cent. For the key infrastructure sectors, the total public sector expenditure outlay will decline 3 per cent to Rs 8.4 lakh crore next year.



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