From Consumption to Investment-Union Budget 2022

The dread of coronavirus, as well as its devious mutations, will throw a dismal cast well over Yearly Financial Statement, that determine the Indian economy’s trajectory for the future year, when Nirmala Sitharaman, Finance Minister, unveils her fourth budgetary plan on February 1.

Some could argue that now the economy is better positioned this year with optimistic growth, based on the Ministry of Statistics and Programme Implementation’s (MOSPI) initial advance forecast of the gross domestic product for the fiscal year 2021-22 of 9.2 percent or even the RBI forecast of 9.5 percent. During Q2 2021-22, GDP at Constant (2011-12) Costs is expected to be Rs 35.73 lakh crore, somewhat more than the equivalent amount in FY20.

The depressed base number of Rs 145.69 lakh crore, the in 2019-20-real GDP  after 7.3 % shrinkage, lies behind the hopeful outline. On a more optimistic note, the economy has recovered to pre-pandemic levels, and previously dormant sectors such as mining, agriculture, as well as manufacturing are starting to show signs of life.

Balancing Act

The gross domestic product, or GDP, is made up of four primary components: government spending, investment, consumption, as well as net exports. It is frequently used as a measure of the status of the economy.

The efficiency of these components, as well as timely deployments via monetary and fiscal policy, should go a long way toward tackling the economy’s underlying difficulties. Despite inflationary pressures hovering slightly below the RBI’s target, monetary policy’s ability to revive the economy is restricted.

Private Consumption

And over 50% of the GDP is made up of private final consumption expenditure (PFCE), which represents the economy’s customer requirements.

Investment

Private investment, also known as gross fixed capital formation, accounts for over 30% of India’s Gross domestic product.

Final year, the central government planned to achieve a large multiplier impact on GFCF by increasing capital spending. This budgeting is likely to persist the plan.

In summary, the budget’s effectiveness would hinge on recognizing the Indian economy’s fundamental drivers, such as consumption, plus comprehending the inner workings between the 4 leading drivers.