Infrastructure News

Govt likely to maintain capex momentum in FY25, Infra News, ET Infra


Budget Expectations: The government is expected to maintain its focus on increasing capital expenditure, particularly in the infrastructure sector, in the upcoming Budget to drive economic growth, PTI reported. The Budget has been prioritising capital expenditure post COVID-19, which has helped stimulate the economy. India has experienced a remarkable growth rate of over 7 per cent in the last three years, surpassing other major economies.

During the current financial year, the government has allocated a record high of Rs 10 lakh crore for capex.

As per PTI report, this allocation has seen a consistent increase, with Rs 4.39 lakh crore in 2020-21, a 35 per cent increase to Rs 5.54 lakh crore in the following year, and a further 35 per cent hike to reach Rs 7.5 lakh crore in 2022-23. Finally, it reached a significant high of Rs 10 lakh crore, marking a 37.4 per cent increase.

The upcoming Budget is also expected to allocate a substantial amount for capital expenditure as it has a multiplier effect on the economy and attracts private investment.

“We estimate Government of India to budget for a capex of Rs 10.2 lakh crore in FY25, implying a relatively sedate YoY expansion of about 10 per cent, compared to over 20 per cent expansion seen in each of post-COVID years. The slowdown in capex growth is likely to have some bearing on economic activity and GDP growth,” Icra said in its pre-Budget expectations, as quoted by news agency PTI.

Capex in India has increased by 31% to Rs 5.9 lakh crore in the period of April-November of the current fiscal year. This accounts for 58.5% of the budget estimate for the fiscal year 2024.

In comparison, the capex was Rs 4.5 lakh crore in the same period of the previous fiscal year, accounting for 60.7% of the provisional estimate for FY23.

Although the growth in capex has been significant, there was a contraction in capital spending in October 2023 (-14.9 per cent), marking the first instance of contraction since April 2023. However, there was a marginal increase of 1.6 per cent in November 2023. The monthly capex averaged at Rs 73,210 crore, which is 12.2 per cent lower than the required monthly average of Rs 83,400 crore to meet the budgeted target of Rs 10 lakh crore.

India faces a significant infrastructure deficit, and the government plays a crucial role in addressing this issue by attracting private investment. With the growth of the economy, there has been an increase in private investment in sectors such as steel, cement, and petroleum.

Seshadri Sen, the head of research at Emkay Global Financial Services, as quoted by PTI, believes that the government’s capex will continue at a faster pace.

This investment will help unlock a virtuous cycle, where investment leads to productivity growth, job creation, increased demand, and exports, ultimately boosting the economy.

Budget FAQs

What was the capex allocation in the Union Budget?
FM Sitharaman allocated Rs 10 lakh crore towards capital expenditure or capex in the Union Budget in 2023 for FY23.

What are the various parts of a capex cycle?
The GFCF has three major contributors — households, government and corporate.

When will the Budget be presented?
FM Nirmala Sitharaman will announce Budget 2024 on February 1, 2024

(With inputs from PTI)

  • Published On Jan 28, 2024 at 10:47 AM IST

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