Topic: Government Budgeting.
5. What is capital expenditure? Analyse what impact the emphasis on capital expenditure in the Union Budget will have on the Indian economy. (250 words)
Difficulty level: Easy
Reference: Indian Express
Why the question:
This year’s Budget seeks to boost public investment by 35.4% at current prices over last year to raise its share in GDP to 2.9% from 2.2% last year. With grant-in-aid for state investments, the Budget hopes to increase public investment share to over 4% of GDP.
Key Demand of the question:
To write about the impact of increased capital expenditure on the economy of India.
Analyse – When asked to analyse, you must examine methodically the structure or nature of the topic by separating it into component parts and present them in a summary.
Structure of the answer:
Introduction:
Begin by defining a capital expenditure as part of the budget.
Body:
First, write about the various measures proposed in the Budget 2022 to boost capital expenditure in India.
Next, write about the positive impact the increased capital expenditure will have on the economy of India – speedy and sustainable revival, crowding in private investment, boost to investment activity and support economic growth in the next year etc.
Next, write the downside of increased capital expenditure – higher inflation, higher fiscal deficit etc.
Conclusion:
Conclude by writing a way forward to have a prudent increase in capital expenditure whilst adhering to fiscal limits of borrowing.
