High-capex budget likely in an effort to counteract the global downturn

by Mapping Returns
Finance Minister of India

In the forthcoming budget, the Center is likely to continue with its heavy capital investment plan to combat a deeper global downturn that could hinder India’s economic recovery.
Even though it will be this government’s final full budget, a “balanced approach” will be key because revenues next year are unlikely to be as strong and because India is expected to be affected to some extent by the global economic turmoil, an official said. In April or May 2024, there will be another general election.

A little more than a fifth of the overall budget was set aside for the infrastructure sectors in the FY23 budget, which increased capital expenditure by 35.4%. It is anticipated that total capital expenditure will rise from 2.5% of GDP in FY22 to 2.9% of GDP in FY23. The Center used 45.7% of the entire budget during the first half of the fiscal year. The budget is anticipated to be released on February 1.
A 20–25% increase in the budget’s capital spending allocation is anticipated, along with a separate line of credit for states.

No Indulgence
Another official stated that there would be “no compromise on capex because that is greatly needed to boost the economy” and that the government will continue with balanced spending without splurging. Due to the demand for infrastructure and their ability to take in big amounts of money, railways, roads, and ports are likely to experience a major increase in their allocations.
The Gati Shakti initiative requires more funding for these industries as well. 16 ministries are gathered on the digital platform to conduct infrastructure connection projects in a coordinated manner. According to a third official, the annual allocation for other social sector ministries will probably increase by 15% to 20% depending on how they are used in FY23.

According to the person, the finance ministry has instructed ministries to move forward with their budgetary plans.

Pre-budget Conversations

Economists recommended the government increase capital spending at their pre-budget discussions with Nirmala Sitharaman on Monday. High capital spending has aided economic expansion and has begun to revive private investment.

According to economists, next year, when the Indian economy will be hit hard by the global slowdown and the near-recession in the developed world, this help would be essential. India’s growth is predicted by the IMF to slow to 6.1% in FY24 from an estimated 6.8% in the current year. In a report released earlier this month, Goldman Sachs stated, “We also expect the government to continue its focus on capital spending and are seeing signs of the nascent investment recovery continuing.”

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