Fiscal constraints

India needs to boost tax-to-GDP ratio

The increase in allocation for capital expenditure in the Union Budget has been welcomed across the board. Given that the economy is recovering from a pandemic-induced disruption and the private sector is reluctant to invest because of weak demand, it is expected that capital expenditure by the government will help augment growth and crowd in private investment over time. Higher capital expenditure by the government and improvement in infrastructure will also help increase medium-term potential growth. Although India needs massive investments in infrastructure, the fiscal situation may not allow the government to spend consistently in this area. Even for the