Supply Without Private Conviction

AFTER SUCCESSIVE Budgets that attempted and could not engineer a consumption revival, the government has decisively pivoted back to the supply side of the economy. This shift is neither accidental nor ideological. The consumption push did not deliver the virtuous cycle policymakers hoped for, and private investment – the elusive lodestar of the post-pandemic recovery – remains stubbornly below pre-Covid levels.

- By Srinath Sridharan

In 2025, GST rate cuts were projected as a trigger for demand, confidence, and ultimately private capex. The theory was orthodox and familiar: revive household spending, crowd in private investment, and let the State step back. Consumption recovered unevenly, savings remained precautionary, and corporate investment failed to broaden meaningfully.

What replaces it is a return to supply-side management: public capital expenditure, sectoral pushes, targeted skilling, and visible infrastructure. On paper, this is sensible. In practice, it exposes the central weakness of India's political economy today – a government willing to spend, but a private sector reluctant to commit; eager announcements without a parallel reshaping of incentives and expectations. The Budget moves resources, but it does not move belief.

That absence of belief is now the most inconvenient truth of India's economic moment. Despite macro stability, healthier corporate balance sheets, and repeated reform assurances, private capital continues to defer long-term bets. The reason is not a shortage of opportunity, but a deficit of predictability. Capital is not waiting for another incentive scheme; it is waiting for conviction – that rules will not change midstream, contracts will be enforced without friction, and commercial disputes will be resolved within reasonable timeframes. Without this, the ambition of Viksit Bharat 2047 risks resting disproportionately on public expenditure. Long-pending administrative law reform – frequently acknowledged and consistently deferred – remains the missing institutional bridge between headline growth and sustained private investment.