 "Budget 2024 expected to boost infra, and logistics with increased capex")
The general budget for FY25 is expected to continue the push on capital expenditure, as has been the trend in the past few years, with industry demanding an increase of 25 per cent in the capex allocation over the revised estimate of FY24.
However, with the budget expected to be tabled in the second half of July, essentially covering expenditure to be taken up for eight months ending March 2025, experts feel that the capacity to spend on projects may be curtailed.
“The ability to spend on so many projects in eight months is limited. It’s easy to say we should have more capex, but do we have the capacity? To my mind, it will be a combination of things. If there are things in the manifesto, then there would be increased allocation towards that, including a token increase in capex,” said Madan Sabnavis, chief economist of the Bank of Baroda.
The Confederation of Indian Industry (CII) has suggested that capex this year should focus primarily on creating rural infrastructure, such as irrigation, warehousing, and cold chain.
In her interim budget, Finance Minister Nirmala Sitharaman had raised the Centre’s capital expenditure target by 16.9 per cent for FY25 to Rs 11.1 trillion over the revised estimates for FY24.
The provisional accounts of 25 states for FY24 showed they achieved 84 per cent of the budgeted capital expenditure, with four states -- Uttar Pradesh, Telangana, Bihar, and Sikkim -- spending 100 per cent or more than the targeted amount, according to data compiled by the Comptroller and Auditor General of India (CAG).
The budget for FY25 is also expected to announce the conditions linked to the Rs 75,000 crore loans to be given to states.
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In May, S&P Global Ratings upgraded its outlook on India, saying, “Our positive outlook on India is predicated on its robust economic growth and pronounced improvement in the quality of government spending.”
While experts believe that private sector investment is showing green shoots, the government must continue to increase capital expenditure to attract more private sector funds.
India’s GDP data shows that the private non-financial gross fixed capital formation has picked up in the last two years, with a growth of 4.6 per cent compounded annual growth rate in the January-March 2024 period.
A senior official recently said that private capital expenditure will be an important driver of growth and employment for the rest of the decade.