Creating Jobs by increasing Capex

For the next fiscal year FY23, capital expenditure budget – or investments into productive capital creation has been increased to ₹7.5 lakh crore, 24% higher than the FY22 revised estimate of ₹6 lakh crore and the revenue expenditure, i.e., into items such as salaries, pensions, interest, and subsidies has increased just by 1%.

Between FY11 and FY21, capital expenditure averaged just 12% of the government’s overall expenditure.
For the current FY22, that ratio increased to 16%, and for FY23, the Finance Minister has proposed to take it to 19%.

Data from the International Labour Organization (ILO) suggest that India’s employment to population (over the age of 15) ratio has steadily dropped from 55% in 2005 to 43% in 2020 compared to 52% in Bangladesh, 63% in China and 73% in Vietnam.
Women form just 20% of India’s workforce, while they comprise between 30% and 70% of the workforce in the other three countries.

To foster domestic jobs and output, backing investments into capital expenditure is a step in the right direction.

Sustained investment in roads, railways, freight corridors, power, renewable energy along with initiatives such as Production-Linked Incentives (PLI) and other enabling legislation, will create the conditions for drawing in private sector investments into manufacturing, and foster job creation and sustainable growth.

Not greenfields

Not all the headline capital expenditure is indicative of fresh greenfield investments.
Eg: The ₹0.5 lakh crore of clean-up of Air India’s books this year counts as capital expenditure.

Less outlays for critical areas

While there is a visible thrust on hard capital expenditure, the outlays towards critical areas such as education, healthcare and urban infrastructure remain subdued.

Thrust on fiscal deficit

The thrust on capital expenditure has resulted in notably higher fiscal deficit numbers than expected.
Notwithstanding the intent and commitment, such high fiscal deficits can put
- Pressure on interest rates and the Reserve Bank of India,
- Raises the risk of inflation,
- Higher current account deficits, and
- Attendant threats to financial stability.

It is up to the entire administration – Central, State, and local – to ensure that the funds are utilised in a timely fashion, and result in delivery of world-class infrastructure.
Ease of doing investments have to be continually addressed, especially around key areas such as land acquisition, contract enforcement, and policy stability.
Sustained investments in manufacturing and value-added services hold the key for the growth of small businesses, jobs, and our economic well-being.

Today Current Affairs Upsc Exam Syllabus & Previous Yearpaper.