Viewpoint: Making public investment work

23 AUG,2021 | MEDC


  • The Indian economy is on a revival path and the best way to support a comeback is through employment generation. Research has shown that when governments spend on infrastructure development, they create many new jobs in the economy. The amount of employment generation depends on the mobility of labour – how easy it is to move across companies within sectors. The global observation has been that public infrastructure investment creates more jobs in energy-related sectors in advanced economies, and in water and sanitation-related sectors in developing economies. We need to remember this when making our public investments work in the larger interest of society.
  • However, even in emerging economies, the employment generation impact could be higher for green investments. That is because many jobs in renewables do not require much formal education and also have relatively low barriers to entry. Green growth is especially relevant to India. It entails a growth path that addresses both the socioeconomic and the environmental aspects of a country. Green growth targets with special focus on employment generation are a particularly challenging socioeconomic target for India. Investment and targeted intervention in this area can generate a multiplier effect throughout the economy.
  • Investment in research and development can also create jobs – though mostly for high-skilled workers. Despite it being a much smaller component of total public investment – mostly confined to government institutions and bodies of higher education – policymakers cannot afford to overlook it. Scientific breakthroughs are achieved through disruptive, innovative and cutting-edge technologies, with industry being a driving force to deliver this. Covid has forced digitalization upon us at an unprecedented pace, and government needs to continue providing routes for public and industry-partnered consortia, which reflect the environment required for innovation in the real world, rather than relying solely upon academia-led consortia. Human capital is our USP and adequate investment should be made in it.
  • In the power sector, many of the end objectives have still not been met. Even though the sector has been unbundled, the mounting dues therein remain a drag on state finances. We need to have truly independent regulators to fix realistic tariffs, and subsequently hold the discoms responsible for realizing electricity costs. It is easier said than done to unshackle the past baggage of government interventions, but some bold steps now need to be taken. Investing strategically in renewable energies, innovation, and digital technologies will help India decarbonize its economy without sacrificing the wellbeing of its people.
  • As we emerge from the pandemic, we must prioritize investment in water and sanitation, which is essential for the survival of millions at the bottom of the pyramid. The post-Covid world is expected to lead to the rise of a new normal, one in which investment, productivity, and economic growth in the service of the socioeconomically marginalized is prioritized. In this scenario, getting our economy back on track by making public investment work is not optional.

*Photo Credit: Google




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