NEW DELHI: In a bid to give impetus to economic growth, the Centre is considering a 20-30% increase in the capital expenditure (capex) target for the financial year 2024-25, as per sources.
The announcement will be made in the interim budget 2024, which will be presented by Finance Minister Nirmala Sitharaman on 1 February in the Lok Sabha.
The projected capital expenditure is expected to be around Rs 12-13 lakh crore for FY25, marking an increase from the FY24 target of Rs 10 trillion. In FY24, the government had increased the capex by 33%. Of the Rs 10 lakh crore set aside for capex in FY24, Rs 1.3 lakh crore is meant for lending to states for their capex needs.
In the current fiscal year, India’s capital expenditure (capex) has risen by 31% to Rs 5.9 lakh crore during the period of April-November, as per the Controller General of Accounts (CGA). This amount represents 58.5% of the budget estimate for the fiscal year 2024.
The government is expected to maintain its focus on increasing capital expenditure, especially in the infrastructure sector, in the upcoming Budget 2024, following last year’s record high allocation of Rs 10 trillion towards capex in Budget 2023.
This surge was driven by the government’s aim to boost investment and job creation, aligning with its focus on the Four I’s - Infrastructure, investment, innovation, and inclusion - over the next 25 years. Prime Minister Narendra Modi-led NDA government has maintained its focus on building infrastructure – roads, ports, airports, etc – especially in its second term. For this, the government has trebled its allocation to capex in the past five years. In 2019-20, the government spent nearly Rs 3.34 lakh crore in Capex, which has touched over Rs 10 lakh crore in 2023-24.
As per Madhavi Arora, economist at Emkay Research, election cycles where the NDA has been the incumbent have seen capex prioritised over revenue expenditure, especially in current cycle (FY24 capex/GDP at 3.3% vs average 2.5% for last three years), when the party seems to be assured of returning to power and, therefore, the need for wooing voters via fiscal populism has reduced.
“In contrast, the two cycles where the UPA was in power (FY09 and FY14) saw capex/GDP decline when compared with the previous three years (FY09: 1.6% vs 2.0% average prior three years; FY14: 1.7% vs average 1.8% prior three years).