The current government's strategy is to make the public sector the engine of the country's development rather than the private sector

- There are many reasons why the private sector is moving away from investing

There was a time when the current ruler was interested in private sector led development. It was claimed that the government would step down and play the role of director where necessary.

Confidence in the private sector has now waned and the emphasis is on government-led development. Special emphasis has been laid on government capital expenditure in the budget for the financial year 206-2.

Gears changed

The country's finance minister claimed that the government had spent more capital than estimated in 2021-22. The revised figure of capital expenditure has been set at Rs 2,09,611 crore against the budget estimate of Rs 2,3,8 crore. However, after reading the fine print, something different was seen. The revised figures include Rs 4,151 crore deposited in Air India. The money was sent to pay off its previous loans and liabilities before the privatization of Air India. I don't know if repaying a loan is a capital expense! If this amount is deducted, the figure of capital expenditure in the financial year 2021-2 will go up to Rs. 2,50,60 crore. This figure is even lower than the budget estimate.

This is not surprising. The government's ability to spend on capital accounts is under pressure for a number of reasons. These include factors such as multi-level decision making, massive paperwork, accountability, etc. This tension will not abate as the current ruler has changed gears.

There is another more disappointing surprise in the budget figures. The finance minister has announced that states will be allowed to borrow an additional Rs 1 lakh crore free of interest to spend capital. However, the point was immediately made clear that states would be able to borrow directly from the market and the Center would simply lift the burden of interest. The real surprise is that the finance minister has covered this amount of Rs 1 lakh crore in the capital expenditure announced by the central government in the budget for the financial year 205-6 and estimates the capital expenditure for next year to be Rs 4,50,8 crore. He also said that the government has allocated 3% more for capital expenditure. Can additional borrowings be considered as capital expenditure of the Central Government by the State Governments for their capital expenditure? If this amount is deducted, the provision for capital expenditure in the next financial year will be Rs. 2,50,8 crore, which is only Rs. 1 lakh crore more than the revised estimate for the financial year 2021-2.

Lack of trust in the private sector

Government capital - The government's pretense of achieving growth through expenditure is excessive. Besides, the government does not believe in the interest of the private sector to invest more capital. Two years ago, the government decided to privatize BPCL, CCL and SCI. Last year, the government announced a proposal to privatize two banks and a public sector insurance company. Apart from this, monetization of government assets worth Rs 3 lakh crore was also announced. None of these proposals have been finalized. Railways had called for bids for privatization of 121 passenger trains on 108 routes but no bids were received. In the current financial year's budget, the disinvestment estimate of Rs 1.5 lakh crore has been slashed to Rs 2,000 crore. Most of this money is expected to come through LIC's IPO.

There are a number of reasons why the private sector is shying away from investing. The main reason is lack of demand. Capacity utility is around 50% in many industries. Why would anyone come forward to invest where capacity is dormant? In addition, the business environment is becoming more difficult.

Ignore the advice

The following is the advice given by several economists to get the country's economy out of the current recession and unemployment.

- Increase demand by providing more money in the hands of poor and middle class people, transfer cash and advise to reduce indirect taxes.

-Support MSMEs that are closed or down. This support will create millions of jobs.

-Increase welfare expenses. The money required for this can be raised by levying more taxes from the rich.

-SEBI, RBI and Income Tax Department are advised to review the regulations implemented through various standards.

It has also been suggested that CBI, ED, IT, etc. should not be strict against them as far as business and banks are concerned.

Will the finance minister show a solution to the questions that are baffling many economists? The nominal GDP will be 11.10 per cent (as projected in the budget papers) and the real GDP will be 5 per cent (as estimated by the new CEO) in FY 205-6, right? There will be no happiness like 5% inflation!