Bridging the economic cycles: The Imperative of Infrastructure Investment and Employment Generation

During economic upswings, investors eagerly pursue development opportunities. However, during downturns, most economies adopt expansionary policies, increasing spending to stimulate demand. At such times, the allocation of investment becomes crucial. When considering government funding sources, two primary stakeholders come into focus:

1. Taxpayers: A higher deficit resulting from increased spending may lead to elevated future taxes, disincentivizing work.
2. Private Investment: Heightened future taxes can demotivate entrepreneurs, causing a loss of confidence in the government. This loss of confidence may hinder reinvestment and lead to a potential government default, coupled with inflation and slower economic growth.

The optimal government strategy involves investing in infrastructure development after addressing citizens’ basic needs. This approach encourages increased private sector investment, aiding in economic recovery. Furthermore, a caring government that attends to its citizens’ necessities during economic downturns tends to garner support from taxpayers in the future.

China and India, neighbours used to share almost same level of economy in early nineties but now the deference’s has increased to multiple folds in China’s favour While direct comparison isn’t entirely fair due to their diverse cultures, geographies, and governance systems, there is always room for learning. This article focuses on China’s social infrastructure development, particularly in improving literacy and generating employment. China has successfully created jobs across skill levels—skilled, semi-skilled, and unskilled—whereas India has primarily concentrated on skilled employment, lagging significantly in providing platforms for the semi-skilled and unskilled labour force.

The first part of this article emphasizes the necessity of infrastructure investment regardless of the economic cycle. It posits that investing in infrastructure remains a prudent strategy irrespective of economic highs or lows. The second part draws inspiration from China’s model to underscore the need for generating employment opportunities at lower skill levels. By highlighting the success of creating jobs for a diverse labour force, especially in labour-intensive infrastructure projects, it advocates for a similar approach in other economies.

In essence, this article underscores how infrastructure development in sectors like real estate and transportation can address both financial and social challenges in the long term. Infrastructure development spans various sectors such as IT, Education, Transportation, and Real Estate. This strategic investment approach helps restore economic momentum, fostering private sector confidence.