Government may increase capital expenditure for infrastructure sector in the budget

To stimulate economic growth, the government may decide to increase capital expenditure for the infrastructure sector in the upcoming budget, as private investment growth has not kept pace. The government has placed a greater focus on capital expenditures in the budget since the Corona pandemic. It has not only strengthened the economy but also made it the only nation to grow at a rate higher than 7% over the previous three years.

During the current financial year, the government has made a record provision of Rs 10 lakh crore for capital expenditure. During 2020-21, the government had earmarked Rs 4.39 lakh crore, which increased by 35 per cent to Rs 5.54 lakh crore the next year.

In 2022–2023, capital expenditures rose by 35% to Rs 7.5 lakh crore; subsequently, they increased by 37.4% to reach an all-time high of Rs 10 lakh crore. In the next budget, the government is also anticipated to set aside a sizable sum for capital expenditures, since these investments boost private investment and have a multiplier effect on the economy.

According to rating agency ICRA's pre-budget projections, the government may allocate Rs 10.2 lakh crore for capital expenditures in FY 2025, a 10% increase over the previous year. Economic activity and growth rates are probably impacted in some way by capital growth.

From April to November of the current fiscal year, capital expenditures climbed by 31% to Rs 5.9 lakh crore (or 58.5 per cent of the Budget Estimate for FY2024). The head of research at Emkay Global Financial Services, Sheshadri Sen, predicts that government capital spending will increase.