 infrastructure is the biggest con in mainstream economics and I bet you have heard economists on TV or read their columns in newspapers repeating the same tired old mantra that the only reason China has become the factory of the world is because it has great infrastructure. Seems fair after all why would a big multinational company come to India if we don't have good highways, good ports or big cargo airfields. If we built world-class infrastructure then companies would be able to easily source raw materials from any part of the country they would be able to transport their goods quickly and at a low cost to each and every market within and outside the country and that will make India an industrial powerhouse. That's what economists tell us. Economists also tell us that investing in infrastructure has huge economic multiplier effects. When you build roads, bridges, airports, ports you need huge amounts of cement, steel, coal, heavy machinery and a lot of labor. So investing in infrastructure generates demand for all these inputs and also creates employment. In fact the World Bank claims that every one rupee invested in building a road generates seven rupees of economic value. You might have come across some version of this number the infrastructure multiplier. It helped create a consensus which we accept uncritically that infrastructure spending leads to economic growth and development and creates jobs. And this is precisely why the media is going gaga over this year's budget because the Modi government has allocated 10 lakh crore rupees on it capital expenditure. Out of this, 26% will be spent on highways and roads, 24% will be spent on laying more railway tracks and upgrading train station and 14% will be allotted as interest free loans to states for them to spend on infrastructure projects. Why is everyone excited about this? Because it is supposed to boost India's GDP, kick start an investment cycle and create much needed jobs. But as they say, in God we trust, rest bring data and here's what the data tells us. Let's break it up one by one and let me begin with the idea of the infrastructure multiplier that every rupee invested in building infrastructure generates much more in economic value because of the additional demand it creates. This means that if a country invests, let's say 10% more in infrastructure, is GDP should grow at a faster pace than that because of the multiplier effect of infrastructure spending, right? Has that happened at all? In the nine years between 2014-15 when the Narendra Modi government first came to power, up to the latest budget of 2023-24, the capital outlay for the Ministry of Roads and Highways has increased at an annual rate of 26.3%. But GDP growth in nominal terms, including the projections for 2023-24, is just 10.3%. Adjust this for inflation to get real growth and the outlay for roads has grown at about 20% annually, while real GDP growth is projected to be just 5.3% per year. Forget about a multiplier effect. This seems to be a divisor effect. GDP growth rate is about one fourth of the rate at which expenditure on roads is increasing. What about kickstarting the investment cycle? The Modi government has significantly pushed up capital expenditure since 2020-21. Between 2019-20 to 2022-23, capital outlay has increased at the rate of 29% per year. But what happened to investments? One way to measure it is to look at the gross fixed capital formation data that's issued along with GDP data every year. That has grown at just 12% per year. This graph will show you the comparison. The orange line shows the rise in capital expenditure by the central government as a percentage of GDP. It has gone up from 1.6% to 2.7% last year and in this budget you won't see it in this graph. It is now 3.3% of GDP, almost doubled what it was 10 years ago. But look at the investment rate which is captured in this yellow line of fixed gross capital formation as a percentage of GDP. That has actually dropped from 33% to the 28-29% range from 2015-19. And there's a small dip in the COVID year which was bound to happen. So it is clear that the correlation between government spending on infrastructure and the investment rate in the economy just simply doesn't exist. And it has simply failed to kickstart the investment cycle which has been stalled in the last 7-8 years. And now what about jobs? We've got construction jobs separately collected by CMI from 2016-17 up to 21-22. In these five years, the Ministry of Roads and Highways increased its capital expenditure by 84% in real inflation adjusted terms. But jobs in the construction and real estate sector decreased by 6%. Now you might say that one should also count additional jobs created in the cement sector which is a crucial input in roads. What happened to jobs there? They declined by 62% between 2016-17 to 2021-22. In the metal sector, another crucial input for infrastructure jobs declined by 10%. In mining, which is an indirect provider of inputs to the infrastructure industry, employment fell by 28%. So the number of jobs actually decreased in everything connected with infrastructure. Not just in construction, but also in the key industries which provide inputs for infrastructure projects. As I said, in God we trust, rest bring data. The data is clear. Infrastructure spending does nothing for the economy. It's a complete neoliberal myth. All it does it, it makes life easier for the rich. You want world-class roads, swanky airports and want to feel like they're living in the first world. For 99% of Indians, it is useless infrastructure. That's the show today. 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