Centre will increase capex for economic growth in Budget 2024-25
The Indian government is gearing up to focus on boosting capital expenditure (capex) in the 2024-25 Budget. This will be done particularly in the infrastructure sector, to stimulate economic growth. The government's capex push has ignited a stagnant economic cycle, leading to over 7% growth in the past three years, which is the highest among major global economies.
There have been record capex provisions in recent years
This financial year, the Centre has allocated a record-breaking Rs. 10 lakh crore for capex. In contrast, it set aside Rs. 4.39 lakh crore in 2020-21, which rose by 35% to Rs. 5.54 lakh crore the next year. Another 35% increase occurred in 2022-23, reaching Rs. 7.5 lakh crore, followed by a 37.4% jump to the current Rs. 10 lakh crore.
Expectations for capex in FY25 are high
For the upcoming Budget, experts predict the government will allocate a significant portion to capex, due to its positive ripple effect on the economy and its potential to attract private investment. ICRA estimates that the Centre will budget for a capex of Rs. 10.2 lakh crore in FY25, indicating a modest YoY growth of around 10%, compared to over 20% growth seen in each of the post-COVID years.
Capex has a significant impact on infrastructure and private investment
India faces an infrastructure deficit, with the government taking on the responsibility of attracting private investment. As economic growth accelerates, private investment has risen in sectors like steel, cement, and petroleum. Seshadri Sen, Head of Research at Emkay Global Financial Services, believes that government capex will not only continue but also speed up. This will trigger a virtuous cycle of investment, productivity growth, job creation, demand, and exports.
