Make in India in an ebbing phase – uphill task for budget

Leading economists are pleading for increase in capital expenditure by the public sector to kick-start the growth story, according to a report.
Today, most of the private sector companies are highly indebted, and are unable to invest further, experts said. The capacity utilisation of the manufacturing sector is at a low of 70 per cent, which is discouraging the companies from expansion. As per a report by Crisil, an 11 per cent year-on-year decline is estimated in the capex plans of private-sector companies in 2015-16.
As per the report, the ability of the government to kick-start investments through fiscal measures – especially given the additional elbowroom afforded by falling crude prices – is crucial because it can initiate the demand cycle. Economists are unanimous that public sector spending would lead to improvement in the business environment, so that the private players can follow suit. Investment in high ticket infrastructural projects power, ports, roads, manufacturing and defence, etc. will boost demand for goods which, in turn, increases private demand for output sources like factories
However, a severe resource crunch is also looming over the government. With an estimated revenue shortfall of Rs 87,900 crore in the current fiscal, the government would need to find various alternate sources of revenue to increase the capital expenditure while walking the fiscal tightrope. The government has targeted a fiscal deficit of 3.6 per cent of the GDP in fiscal 2016.
The government needs to find renewed sources of money through hiking taxes in petrol and diesel, increase in cess, as well as asset sale in both central and state government companies, using money from cash rich PSUs, a leading economist opines.