Budget Context and Fiscal Orientation
- Budget 2026-27 marks shift from pandemic crisis management to borrowing-driven growth financing.
- Fiscal deficit guided to 4.3% of GDP, signalling continued macroeconomic consolidation.
- Public capital expenditure scaled to ₹12.2 lakh crore, reinforcing infrastructure-led development strategy.
- MSMEs in manufacturing receive emphasis as structural backbone rather than temporary stimulus sector.
Growth Doctrine and Capex Expansion
- Capex transformed from counter-cyclical tool into central organising principle of fiscal policy.
- Capex share in total expenditure rose from nearly 12% in 2020-21 to over 22%.
- Policy logic assumes infrastructure will crowd in private investment, raise productivity, and create employment.
- Labour indicators reveal disconnect between capital expansion and actual labour absorption.
Employment Indicators and Youth Exclusion
- Youth NEET rate for ages 15–29 remains between 23% and 25%.
- Nearly one in four young Indians remains outside education, employment, or training systems.
- Labour market outcomes appear detached from headline GDP growth driven by infrastructure spending.
Sectoral Employment Elasticity Trends
- Construction employment elasticity declined from 0.59 pre-COVID to 0.42 post-COVID.
- Fewer jobs created per unit of infrastructure spending despite record public investment.
- Agriculture employment elasticity rose from 0.04 to 1.51 in recent years.
- Sector reabsorbs labour, indicating distress-driven fallback into low-productivity activities.
Productivity, Wages, and Industrial Structure
- Net value added per worker increased, while average emoluments lag significantly behind.
- Efficiency gains increasingly captured as profits rather than transmitted as labour income.
- Annual Survey of Industries shows majority of factories employ fewer than 100 workers.
- Large firms dominate output, remaining capital-intensive and relatively labour-light.
Dual Economy and Policy Implications
- Capital-intensive layer drives GDP growth with limited employment generation.
- Informal sector absorbs labour through self-employment, low productivity, and weak income growth.
- Employment treated as eventual by-product rather than direct policy objective.
- Inclusion increasingly depends on formal skills, urban location, and automation compatibility.