Budget 2022: Private consumption expenditure and demand4 min read . Updated: 01 Feb 2022, 10:29 PM IST
Budget 2022 needed to do a lot more to revive consumption. To that end, it teases with a few meaningful initiatives, but big measures to drive consumption by low and lower-middle income households and by rural households, are missing
Slowdown in personal consumption is the single biggest problem facing our economy. Personal consumption has long been the main component of India’s GDP and a continued strong engine of GDP growth. Its contraction as a % of GDP by 300 basis points (bps) over the last 3 years (down from 60.5% in 19-20 to 57.5% in 21-22) was already known, and it is this problem that needed urgent and purposeful remediation. The impact of overall slowdown over last 3 years is made even more urgent by the sharp slowdown in rural consumption over last 6-9 months. All other components, except consumption, have seen a robust recovery post Covid-19 – exports, government expenditure, and fixed capital formation.