Which one of the following best explains the "crowding-in effect" observed in India ?

The crowding-in effect occurs when increased government spending, particularly on infrastructure and capital assets, encourages and stimulates private sector investment. In the Indian context, public investment in sectors like railways, roads, and digital infrastructure improves the productivity of private capital and reduces logistics costs, thereby making private investments more viable.

• Option B is the correct definition of this economic phenomenon.
• In contrast, the crowding-out effect happens when high government borrowing raises interest rates, making it more expensive for the private sector to borrow, which leads to a reduction in private investment.

The Government of India has recently emphasized high Capital Expenditure (Capex) in its budgets specifically to leverage this crowding-in effect to drive economic growth.