Budget 2019: Where Sitharaman can find a cool $1 trn for infra investment

India will need $1 trillion of infrastructure investment to nudge annual GDP growth higher by just half a percentage point in Prime Minister Narendra Modi’s second five-year term. Of this, at least 55% will have to come from public resources. Where’s the money?

Those figures from an analysis by the Confederation of Indian Industry are the No. 1 challenge for Nirmala Sitharaman as the country’s new finance minister gets ready to present her first annual budget on Friday.
While the scale of investment isn’t very different from what India spent in the past five years, the sorry state of corporate balance sheets makes it doubtful whether the private sector can put up its projected 45% share. Besides, the economy is in dire straits, regardless of the near-7% GDP growth portrayed by disputed government statistics.
From consumption and private investment to exports, no cylinders are firing. Government spending is therefore the only hope. But Sitharaman is in a tight corner. It doesn’t help that revenue from a goods and services levy, India’s biggest tax innovation of recent times, continues to disappoint two years after its introduction by her predecessor, Arun Jaitley.
With health, education and other government services also needing more money, the scope to free up funds by cutting public expenditure simply doesn’t exist. Nor is borrowing an option. Annual federal deficits can’t go much higher than $100 billion; borrowing by the public sector is already cornering resources equal to 8% of the economy even as the household sector barely manages to save 9% to 11% of GDP in financial assets. Read More

Article Source -> Business Standard