Union budget likely to continue capex hike to boost investment

The capital expenditure shows an increasing trend over the first three quarters of 2021-22. During April-November 2021, the capital expenditure has grown by 13.5 per cent (YoY)

   
union budget 2023 capex hike

The forthcoming Union budget is expected to focus on boosting capital expenditure in 2023-24 too, as has been the case for the past several years.

With the Centre bullish on economic growth and buoyed by favourable comments by several global agencies like the World Bank and the International Monetary Fund, calling it a resilient economy, it is betting big on public capital expenditure to push the investment cycle and spur India’s economic recovery in the post-pandemic period.

The previous budget for 2022-23 had allotted Rs 7.50 lakh crore as capital expenditure, which was a 35.4 per cent jump over 2021-22.

Capital expenditure relates to funds that are spent on building assets like roads, ports, buildings etc. The economic survey for 2021-22 had noted that capital expenditure had earlier been impacted due to restrictions related to the pandemic, which were in place in 2020-21 and 2021-22.

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However in the second half of 2020-21, when the pandemic related restrictions had been eased, the momentum had risen, which continued in 2021-22 also.

“The capital expenditure shows an increasing trend over the first three quarters of 2021-22. During April-November 2021, the capital expenditure has grown by 13.5 per cent (YoY), with focus on infrastructure-intensive sectors like roads and highways, railways, and housing and urban affairs.

“This increase is particularly substantial given the high YoY growth in capital expenditure registered during the corresponding period of the previous year as well,” the 2021-22 Economic Survey had said, noting that states had been incentivised to increase capital expenditure.

Finance Minister Nirmala Sitharaman had said in her budget speech last year that the effective capital expenditure of the central government is estimated at Rs 10.68 lakh crore in 2022-23, which is about 4.1 per cent of the GDP.

The Rs 10.68 lakh crore allocated for 2022-23 was 27 per cent higher than the revised estimate of Rs 8.4 lakh crore spent in 2021-22.

If the capex is hiked in the forthcoming Union budget, then it would give greater opportunities to private entities to participate in infrastructure projects related to roads, highways as well as railways.

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