Public Investment

A. Significance

♤ Public investment in productive sectors acts as the stimulator, fueling demand and hence growth in the economy. It is particularly important in current scenario of sluggish growth.

♤ At present, capital expenditures is merely 1.7% of GDP which means lesser future growth. Public investment in infrastructure would boost future growth and consumption in the present.

♤ It has domino effect as it crowds in the private investment, which, at present, is significantly depressed.

♤ Private investment is volatile and it being majorly in form of FDI and FII is prone to global risks and hence more volatile.

♤ Private investment in India has been in capital intensive sectors like services. Hence, to boost employment growth public investment is needed.

♤ Public investment is necessary to bridge the sectoral and regional inequalities.