Investment revival: Why reliance on govt spending alone is unsustainable

As the fiscal space tightens, it will be important for private investment to pick up to sustain economic growth over the medium to long term

Among the four drivers of the economy — private consumption, investment, government spending, and exports — government spending, particularly through capital expenditure, has been the predominant force behind India’s growth in recent years. In the ongoing year, the Union government’s capital-expenditure allocation, for instance, stands at 3.4 per cent of gross domestic product. However, reliance on government spending to drive economic growth is not sustainable in the long run because of fiscal constraints at both the Union and state levels. As the fiscal space tightens, it will be important for private investment to pick up to sustain