Pvt sector will have to step up capex: Experts

Synopsis

An 11.1% increase in capital expenditure, announced by the finance minister Nirmala Sitharamn on Thursday, is below than expectation but experts hope this will be significantly revised upwards in the full budget later this year.

BudgET 2024: FY25’s fiscal deficit budgeted at 5.1% of GDP; nominal GDP growth seen at 10.5%

The lower than expected increase in capex in the Interim Budget 2024 will mean that the private sector will have to unleash the animal spirit to maintain the growth momentum, says expert.

“An increase of 11.1% in the infrastructure capex is lower than what has been the run rate in the previous years, which means the private sector will have to step in to maintain the growth momentum,” Jagannarayan Padmanabhan, senior director & global head, consulting, CRISIL Market Intelligence and Analytics said.



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According to Padmanabhan, development of economic rail corridors (commodity specific) will help to de-congest existing lines (mostly eastern part of the country), aid in faster freight movement and in reducing the logistics cost and increasing manufacturing competitiveness.

“Having a focused approach for aiding freight movement will help in achieving the National Rail Plan targets having a 50% modal share in the medium term,” he added.

Though there is consensus among experts that the budgetary allocation is below expectation, there is hope of a higher allocation when the government presents the full Budget after the General Elections in April-May this year.

Also Read: Interim Budget 2024: Here are 10 key announcements for common man

“The infrastructure allocation increase of 11.1%, is frankly below expectations after the 30% and 35% increases of the last two years. But one has to take cognizance that this is only an interim carry-on Budget, and hopefully when the full Budget for 24-25 is formulated, the government may consider going back to the 30% hike levels,” Vinayak Chatterjee, founder & managing trustee of The Infravision Foundation said.

Also Read: Budget at a Glance: From tax to capex, here’s your 2 minute guide to become a Budget Pro

“This interim Budget however, announces some fresh impact areas related to rooftop solar for poverty alleviation, public-private -partnership (PPP) formats for agriculture storage, viability gap funding (VGF) for offshore wind and coal gassification and three railway corridors,” Chatterjee added.

Finance minister Nirmala Sitharaman, on Thursday, announced an increase of 11.1% in the infrastructure expenditure at Rs 11,11,111 crore.

The government made a budgetary allocation of Rs 10 lakh crore in 2023-24, Rs 7.5 lakh crore in 2022-23 and Rs 5.54 lakh crore in 2021-22. Government estimates that infrastructure expenditure has a multiplier effect of 2.45 on GDP in the year of capital expenditure and 3.14 in the next. India aims to become a $5 trillion economy by 2025.

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Harry Byrne

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