Government capital expenditure increases are likely to continue at their current pace

GG News Bureau

New Delhi, 21th Jan. In the face of muted private investment, the government is anticipated to continue focusing on raising capital expenditure in the next budget, especially in the infrastructure sector.

The budget has continuously prioritized capital investment during the post-COVID era, which has resulted in over 7% growth in the last three years and made India the largest economy in the world with the fastest rate of growth.

The government has set aside a record-high amount of Rs 10 lakh crore for capital expenditures in the current fiscal year. From Rs 4.39 lakh crore in 2020–21 to Rs 7.5 lakh crore in 2022–23 and then leaping to Rs 10 lakh crore, a gain of 37.40 percent, this represents a notable increase. It is expected that the government would continue to place a high priority on capital expenditures in the next fiscal year, possibly allocating a sizable sum for them. Capital spending is thought to draw in private investment and have a multiplier effect on the economy.

As per Icra’s pre-Budget predictions, the government is expected to allocate Rs 10.2 lakh crore for capital expenditures in FY25. This represents a very moderate year-on-year expansion of approximately 10%, in contrast to the more substantial expansions seen in the post-COVID years.

Between April and November of the current fiscal year, capital expenditure increased by 31% to Rs. 5.9 lakh crore; however, there was a significant decline in October 2023 and just a slight increase in November 2023. The monthly average has fallen short of what is needed to reach the Rs 10 lakh crore targeted budget.

India has a significant infrastructure deficit, hence the government’s emphasis on capital spending is essential to drawing in private capital. As the economy expands, private investment has improved in industries including steel, cement, and petroleum.

Government-led capital expenditure is anticipated to continue at an accelerated rate, according to Seshadri Sen, Head of Research at Emkay Global Financial Services. This will help to unlock a positive cycle of investment, productivity growth, job creation, increasing demand, and exports.