NEW DELHI: Government is likely to opt for a 15-20% increase in capital expenditure next year, above the Rs 10 lakh crore provided for the current financial year, as it seeks to sustain public spending to spur demand and investment in the economy.
The road transport and highways ministry may be allocated Rs 3.2 lakh crore for 2024-25, compared with Rs 2.7 lakh crore during the current fiscal year – an increase of 18.5%. Similarly, railways could see a 14% rise to Rs 2.8 lakh crore next year, as against Rs 2.4 lakh crore this year.
The move is seen to be positive for sectors, such as, cement and steel, as well as for job creation, as it comes on the back of a healthy rise during the current financial year. In her budget speech last February, finance minister Nirmala Sitharaman had announced a 30% increase in capex to a record Rs 10 lakh crore. Railways and roads had bagged almost half the funds, amid scepticism over their ability to use resources.
For the current year, roads and highways ministry, which has exhausted 87% of the budgeted money, has received an additional Rs 6,000 crore. During the current fiscal year, railways has used over three-quarters of the allocation, railway minister Ashwini Vaishnaw said.
Government sources said impact of higher capex by Centre has been positive for the economy, helping it navigate a troubled global environment on the back of steady domestic demand. Strong orders have also resulted in cement companies ramping up production capacity and large EPC companies having their hands full with projects to be executed.
Politically too, a major focus on large infrastructure creation, such as highways and airports, has helped the Narendra Modi government portray itself as a builder of a “new India”, an image that it would want to reinforce in the interim budget ahead of crucial general elections in less than three months.
At a recent meeting with chief secretaries, government had urged the states to step up focus on capex. In the last few budgets, Sitharaman has also provided for additional funds to states through interest-free loans to help boost their public spending.