India's Infra Push

THE NARENDRA MODI government is betting big on infrastructure to boost the economy’s growth trajectory to the level last seen in 2014-18.

- Minhaz Merchant

India’s GDP rose 7.3 per cent in 2014-15, 8.2 per cent in 201516, 7.1 per cent in 2016-17 and 7.2 per cent in 2017-18. The annual average growth rate for the government’s first four years in office was 7.45 per cent. Thereafter growth dipped to 6.1 per cent in 2018-19 and four per cent in 2019-20.

Two Covid pandemic years followed. The GDP growth be- GDP growth is likely to recover with estimates ranging between 6.8 per cent and 7 per cent.

Thus for the first nine years of the Modi government, the average annual GDP growth rate works out to an underwhelming 5.25 per cent. Strip out the two Covid years with combined near-zero growth and the average annual GDP growth in seven of the nine Modi years rises to a more respectable 6.7 per cent.

However, with trade disruptions hampering export growth, prospects for the tenth year of the Modi government pose a challenge. Growth is expected to dip to a little above six per cent in 2023-24. According to the World Bank, India will however still remain the world’s fastest growing major economy. The Washington-based institution estimates real Indian GDP growth in 2023-24 at 6.2 per cent.

That’s cold comfort for the Modi government in an election year. The key to giving the economy a steroid boost is increasing investment in infrastructure and manufacturing. By raising capex in the Union Budget to over Rs 13 lakh crore in 2023-24 – an increase of 30 per cent over the previous fiscal – the government has signalled its determination to use infrastructure and manufacturing to get the annual growth curve back nearer 7.5 per cent.

If the private sector steps up investment in capex to match the government’s expenditure, the target is achievable. And yet, private industry has been slow to take up the challenge.