Why Governments Choose What’s Safest to Defend, Not Hardest to Prove

In public finance, the safest decisions are not always the most effective ones—just those that are hardest to disprove.

India’s Union Budget over the past few years reflects this drift.

Public capital expenditure has dominated India’s growth narrative for years—roads, railways, logistics, digital infrastructure. The logic was sound when private balance sheets were strained and credit demand was weak. Public spending coordinated expectations and crowded in investment. It delivered results, particularly before the pandemic.

That context no longer holds.

Post-Covid, supply has expanded faster than final demand. Capacity utilisation offers no clear signal of a new private investment cycle. The marginal returns to public capex are increasingly being questioned, and the growth impulse from ever-higher spending appears to be flattening. Yet the strategy remains unchanged.

That persistence is the point. It’s a psychological blind spot.

Public investment endures not because it is failing, but because it is defensible. Kilometres can be counted. Funds can be audited. Progress can be inaugurated in grand events even when growth stays muted. Spending is explainable. Outcomes can always be deferred.

Commitments are different.

Policy stability, regulatory restraint, credible exit rules—these are promises about the future. They cannot be audited. They can only be tested. And once tested, they can fail.

So governments avoid them.

Elected governments also face real pressures to show visible delivery, especially after shocks like Covid, when citizens look for concrete signs that the state is “doing something.” Visibility is rewarded long before credibility is tested.

Loss Aversion
It may come across as political strategy or economic miscalculation. But at its heart, it is loss aversion. Psychological research shows individuals overweight downside risk when blame is concentrated, and institutions behave the same way. Public capex diffuses responsibility. Trust concentrates it. When projects underperform, circumstances absorb the blame; when commitments break, accountability has a name.

The psychological underpinning of the strategy is minimising exposure. Maximising exposure is merely the packaging of it.

This offers a glimpse into why decisive political moments do not automatically unlock private investment. In 2019, Kashmir presented clarity, momentum, and a rare alignment of expectations. Infrastructure followed. Incentives were outlined. Security shifts, implementation challenges, and broader policy uncertainty all shaped how the opportunity was perceived. People waited for two years with bated breath. Yet private capital stayed cautious. Why?

Because the opportunity was constrained by narratability. Investors could not model a future that felt stable enough to bind themselves to. Yes, the state acted, but it did not bind itself—and capital noticed.

It is not that private investors are timid. They are calibrated, though. They do not ask whether infrastructure exists. They ask whether the rules governing it will remain dull, predictable, and unchanged for a decade. They are like Geet in Jab We Met, praying, “Babaji, iss raat ko ab boring bana do.” Boredom, in policy, is the most desirable quality—and the hardest promise to make.

So public spending keeps expanding supply while private capital waits for a signal—one that cannot be photographed but is instantly recognised. A signal that suggests the future will not be reinterpreted mid-cycle.

This is the psychological blind spot embedded in Budgets over the past couple of years: the assumption that growth can be built without belief; that visibility can substitute for credibility; that repeating the safest action will eventually replace the riskiest promise.

This blind spot prevents us from seeing that systems do not respond to effort. They respond to commitment.

And that commitment begins where the state is willing to be proven wrong.

As the Union Budget 2026 unfolds, that is the real test to watch: will India continue investing in what can be verified, or will it finally risk what must be trusted?