Topic: Indian Economy and issues relating to planning, mobilization of resources.
Q5. “Capital expenditure in India faces both structural and cyclical challenges”. Examine the reasons behind the flagging capex and suggest measures to improve fiscal spending efficiency. (15 M)
Difficulty Level: Medium
Reference: IE
Why the Question?
The challenges in achieving India’s capital expenditure targets, emphasizing the need to address underlying structural and cyclical issues for economic growth and fiscal efficiency.
Key Demand of the Question
Analyze the structural and cyclical challenges behind slow capex in H1 FY25. Highlight their impact on fiscal performance and economic growth. Suggest measures to improve fiscal efficiency and meet budget targets.
Structure of the Answer
Introduction
Define capital expenditure and its role in driving economic growth. Mention the decline in capex in H1 FY25 and its underlying causes.
Body
- Structural challenges: – Highlight project delays, institutional inefficiencies, and weak coordination mechanisms.
- Cyclical challenges: – Discuss short-term issues like election disruptions, revenue slowdown, and global inflationary pressures.
- Measures to improve fiscal efficiency: – To Strengthen project execution and monitoring frameworks, Frontload expenditure and improve state-Centre coordination, Ensure innovative financing and revenue mobilization.
Conclusion
Emphasize the need to tackle structural bottlenecks while addressing cyclical challenges. Stress the importance of timely and efficient capex for sustainable economic growth.Top of Form
