Budget 2022-23: FY23 capital expenditure target may top Rs 6.5 trillion

With public investment in high-multiplier infrastructure projects being its main plank for economic recovery, the Modi government is likely to set a capital expenditure (capex) target of more than Rs 6.5 trillion for 2022-23 (FY23) in the upcoming Budget, Business Standard has learnt. The main Budget numbers are still being finalised.

For the current year (FY22), there is concern among the Budget-makers in the finance ministry that the capex target may not be met. However, the shortfall is likely to be negligible, sources said.

“A lot depends on the current January-March quarter. If there aren’t many disruptions in February and March, then the aim will be to come as close to the budgeted capex target as possible,” said a senior government official, conceding that restrictions across states due to the Covid-19 third wave had impacted the flow of capex.

The current year’s capex budget estimate (BE) is 26 per cent higher than the revised estimate (RE) of Rs 4.39 trillion in FY21. A second official said the year-on-year increase in the next year’s target would be at similar levels.

“The Centre’s priority has been to boost economic activity, consumption and create jobs through increased spending on infrastructure. The states and the private sector have been incentivised to do the same. This priority will be there for FY23 as well,” the second official said.

Provided that the current fiscal year’s capex target of Rs 5.54 trillion is met, even a 25 per cent increase from that would take the next year’s capex BE to Rs 6.9 trillion.

Finance Minister Nirmala Sitharaman, who will present the Budget on February 1, has been holding regular meetings with various ministries like railways, highways, power, shipping, coal, and civil aviation, and state-owned companies to monitor the progress of various projects.

The foundation of all these initiatives is the Rs 111-trillion National Infrastructure Pipeline and the PM Gati Shakti National Masterplan. The latter is aimed at ensuring more effective monitoring and better cooperation among central ministries and states in executing major infrastructure projects.

During pre-Budget consultations, industry bodies and economists have advised the finance minister to keep the spending tap open. T V Narendran, president of the Confederation of Indian Industries and chief executive officer of Tata Steel, recently told Business Standard: “We should continue to spend on infrastructure and the government's focus on investment should continue. While there is recovery, it needs to be sustained. Overall, there is fiscal space for us to continue to focus on investments and, more specifically, in infrastructure, because infrastructure is a driver of demand, competitiveness and employment.”

However, for the ongoing fiscal year, there are still concerns. According to the data available on the Controller General of Accounts website, the Centre’s capex outlay till November 30 was Rs 2.74 trillion. While in absolute terms, it is slightly higher when compared with April-November 2020-21, as a percentage of the Budget target, it is lower, at 49.4 percent compared with 58.5 per cent.