Topic: Government Budgeting.
6. What do you understand by investment led growth? Critically examine the efficacy of capital expenditure programmes in India’s long-term growth prospects. (250 words)
Difficulty level: Moderate
Reference: The Hindu
Why the question:
The Finance Minister, Nirmala Sitaraman, said recently that India’s long-term growth prospects are embedded in public capital expenditure programmes. She added that an increase in public investment would crowd in (or pull in) private investment, thus reviving the economy.
Key Demand of the question:
To write about the investment led growth and efficacy of capital expenditure programmes in reviving the economy of India.
Directive word:
Critically examine – When asked to ‘Examine’, we have to look into the topic (content words) in detail, inspect it, investigate it and establish the key facts and issues related to the topic in question. While doing so we should explain why these facts and issues are important and their implications. When ‘critically’ is suffixed or prefixed to a directive, one needs to look at the good and bad of the topic and give a fair judgment.
Structure of the answer:
Introduction:
Begin by defining investment led growth.
Body:
First, write about the various components of investment led growth.
Next, write about the positive impact the increased capital expenditure programmes 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 programmes – 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.
