The fiscal multipliers associated with capex are at least 3-4 times larger than government final consumption expenditure (GFCE) as the former induces much higher consumption spending than normal income transfers.
However, GFCE has played a critical role since April as it provided the initial stimulus to the economy, the ministry said.
Significant recovery in manufacturing and construction augurs well for the support these sectors are expected to provide to growth in FY22.
The ministry cautioned that the country is not yet out of danger. “Social distancing continues to be the most effective tool to combat the pandemic as activity levels continue to rise in the economy, boosted by the rapidly escalating inoculation drive in the country,” it said.
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