Can Centre’s capex frenzy continue unabated?
Mint explores the Centre’s options to keep infra investment going. In the 2016-17 budget, the Centre allocated just ₹2.47 trillion for infrastructure. In 2023-24, this had quadrupled to ₹10 trillion.
As a share of GDP, it has more than doubled in this period from 1.6% to 3.4%. That apart, the Centre pushed states to allocate more for capital expenditure (capex). To enable them to do so, the Union government offered 50-year interest free loans.
In 2022-23, it disbursed such loans worth ₹81,195 crore. For this fiscal, it has allocated loans worth ₹1.3 trillion. It has also released extra instalments of devolution funds to motivate states to front-load capital expenditure.
With major engines of growth—private consumption, private investment and exports—sputtering post-pandemic, it was left to the government to do the heavy lifting. It significantly increased public investment in infrastructure for two reasons. One, public capex has a higher multiplier effect on economic growth.
In 2022-23, India’s economic growth was a strong 7.2% and the government’s first advance estimate puts 2023-24 growth at 7.3%. Two, the hope that it will catalyze private investment that has been muted for a while. Private investment has increased but only marginally so far.
India’s per capita infrastructure investment of $ 91 pales into insignificance compared to Japan’s $1,124, the US’ $938, China’s $622 and Brazil’s $256. If the country has to achieve its ambition to become a developed nation with a $30 trillion economy (it is $3.4 trillion now) by 2047, it needs to invest a lot more to enable a faster pace of economic growth. Under the Fiscal Responsibility and Budget Management Act, the Centre has to eliminate revenue deficit and limit fiscal
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