BY A STAFF REPORTER: To boost economic growth, the government will maintain momentum to increase capital expenditure, especially for the infrastructure sector, in the upcoming budget.
According to sources, the Government of India will budget for a capital of Rs 10.2 lakh crore in FY25, which means a comparatively nearly 10 per cent expansion compared to more than 20 per cent expansion in the post-Covid years. The slowdown in capital growth may have some impact on economic activity and GDP growth.
In the April-November period of the current fiscal, capex grew by 31 per cent to ₹5.9 lakh crore (58.5 per cent of FY2024 BE) from ₹4.5 lakh crore in April-November FY23 (60.7 per cent of FY23 PROV).
The government had made a record allocation of Rs 10 lakh crore for capex in the current financial year. The government had allocated Rs 4.39 lakh crore for 2020-21 which increased by 35 per cent to Rs 5.54 lakh crore in the following year. In 2022-23, the capex was further increased by 35 per cent to Rs 7.5 lakh crore, which subsequently increased by 37.4 per cent to Rs 10 lakh crore.
While economic growth remained high, capital expenditure contracted in October 2023 (-14.9 percent; the first instance of contraction since April 2023) and then rose 1.6 percent in the quarter in November 2023.
Special emphasis has been laid on capex in the post-Covid-19 budget. This has started a dormant cycle for the economy. As a result, India has grown by more than 7 percent in the last three years, which is the highest among the world's large economies.