New Delhi: One of the biggest headlines to emerge from last week’s Budget presentation is the central government’s continued ramp-up of capital expenditure – a move that represents a big bet on India’s future, says Hindustan Times editor-in-chief Sukumar Ranganathan. He made these comments on a recent episode of “Grand Tamasha”, a podcast jointly produced by HT and the Carnegie Endowment for International Peace and hosted by Carnegie’s Milan Vaishnav.
The central government’s capex has soared from 1.7% to 3.3% of GDP in just three years; the most recent boost represents a 37% year-on-year increase from the previous year. According to Ranganathan, the figure is even bigger if one considers central assistance to states. What this means in practice is “that India has taken the tough and long road to prime the economy, understanding the fact that private investment is unlikely to pick up in the short term,” said Ranganathan. “The hope is that a lot of this government spending will create infrastructure that will then attract private investment.”
While the Budget drew plaudits for both its infrastructure push and fiscal prudence, it was not entirely devoid of electoral signalling. In a year when nine states will go to the polls and one year ahead of the 2024 general elections, Ranganathan noted that the Budget sent subtle signals to a wide diversity of groups, from small business owners to Dalits and tribal people. The Budget sent a signal that “they were seen and not being ignored” but at the same time “the government did not open up its purse strings and spread money all around”, explained Ranganathan. This is due to the simple fact that the government does not have the fiscal space. “This was a clever Budget in terms of meeting its financial goals without compromising any of this government’s political capital.”
Of course, much of the Budget coverage was overshadowed by the emerging saga over Gautam Adani and his companies. While the recent research report of the Hindenburg Group triggered a steep decline in the share price of several Adani companies, Ranganathan cautioned that “the Adani story is not the India story”. He said most smart investors believe that and have internalised the distinction, which helps mitigate the broader fallout of this saga. “Sure, this is a group that is building a lot of infrastructure in India,” Ranganathan stated, “but, at the end of the day, India remains a huge market for a variety of products made by companies around the world”. Investors may decide it is profitable to “short” Adani, he said, but they would be unwise to short India.
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