Visible progress, invisible exclusion, Pg9

Key Highlights:

• Budget 2026-27 shifts from pandemic crisis management to a borrowing-heavy approach focused on growth and capital expenditure (capex).
• The government aims for a fiscal deficit of 4.3% of GDP, boosting public capex to ₹12.2 lakh crore to promote infrastructure and MSME growth.
• Despite macro-economic stability, the connection between capital expansion and employment is weakening, leading to jobless growth.
• Youth NEET rate (15-29 years) remains high at 23%-25%, indicating a significant portion of young Indians are outside employment, education, or training.

Detailed Insights:

• Post-pandemic, capex became the organizing principle of fiscal policy, increasing from 12% of total expenditure in 2020-21 to over 22%.
• Construction employment elasticity has declined, meaning each unit of capex creates fewer jobs than before.
• Agriculture is reabsorbing labor, indicating distress-driven fallback into low-productivity activity, contrasting with typical development patterns.
• Public investment favors capital intensity, widening the gap between productivity and wages, with efficiency gains largely captured as profits.
• A dual economy is emerging, where a capital-intensive upper layer drives GDP growth with limited job creation, while a lower layer absorbs labor through informality.
• The current economic model prioritizes growth, treating employment as an eventual by-product rather than a co-equal objective.

Key Concepts Involved:

• Capital Expenditure (Capex): Funds used by a company to acquire or upgrade physical assets such as property, buildings, or equipment.
• MSME: Micro, Small, and Medium Enterprises, which are classified based on investment and turnover, playing a crucial role in economic growth and employment.
• NEET Rate: The percentage of young people (typically 15-29 years old) who are Not in Education, Employment, or Training.