Definition
Crowding In
Crowding in is when government spending, especially on infrastructure, stimulates rather than displaces private investment by raising demand and improving productivity.
The opposite of crowding out, crowding in holds that well-targeted public investment, like roads, ports and power, lowers private firms' costs and lifts demand, encouraging companies to invest more rather than less.
India's emphasis on government capex in recent budgets rests on this logic: build infrastructure to catalyse private investment. Whether public borrowing crowds in or crowds out private investment depends on the economy's slack and how productively the money is spent.
Related terms
- Fiscal PolicyFiscal policy is the government's use of taxation and spending decisions, set out mainly in the Union Budget, to influence the economy.
- Bond Yield (10-Year G-Sec)The 10-year G-Sec yield is the benchmark interest rate on India's most-traded 10-year government bond — the single most-watched gauge of the cost of long-term money in the economy.
- Keynesian EconomicsKeynesian economics argues that aggregate demand drives output and employment, and that governments should use fiscal and monetary policy to stabilise the economy in downturns.
- Fiscal DeficitThe fiscal deficit is the gap between the government's total spending and its total revenue, showing how much it must borrow in a year.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.