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Increase in Capex an Encouraging Sign
Feb 27, 2016

Which is a rupee well spent by the Government, on capex or on things like subsidies? In a country like India that's starved of growth and that perpetually runs a deficit, it is indeed the capex, isn't it?

Investments in fixed assets helps improve productivity. It leads to greater income generation down the line. In fact, this is borne out by a study as well. As per a leading daily, for every rupee spent on capital formation by the Government, additional income generation was to the tune of Rs 2.45. And for transfer payments and subsidies, additional income generation was just one rupee.

It is in light of this information that today's chart of the day is an encouraging sign. It highlights how Government's capital expenditure as a percentage of budget estimates has been the highest this year in the last five years.

Unfortunately, this year's jump was possible because of the wind fall from lower crude prices. Therefore, maintaining a similar pace next year could be tough, especially when finances will face strain on account of 7th pay commission and one rank one pension scheme. It will be interesting to see whether this Government chooses to be different than its predecessor in this regard.

Data Source: LiveMint,

This Chart Of The Day was published in The 5 Minute WrapUp - Now Is the Time to Differentiate Yourself from Other Retail Investors

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