Centre to take foot off capex pedal after FY25 budget
NEW DELHI : After an expected spurt in the next fiscal year, government capital expenditure (capex) may grow at a more sedate pace in the years ahead as the Centre sets its sights on fiscal consolidation, two people aware of the plans said. The Union government may boost capex allocation by 25% to a record ₹12.5 trillion in 2024-25, Mint reported in November. However, the Centre is also keen to bring the fiscal deficit below the targeted 4.5% by 2025-26.
Accordingly, it prefers a more moderate capex growth after 2024-25, one of the two people said on the condition of anonymity. By then, private investments are expected to do the heavy lifting as well. “The fiscal consolidation target is sacrosanct," the person said.
While the government’s capex will continue to increase after 2024-25 in absolute terms, the rate of increase will not be as steep as it is now, the person added. Meeting the fiscal consolidation target is difficult, but not impossible, said the second person, adding the government could bring down fiscal deficit from 9.2% in 2020-21 to 6.4% in 2022-23. A second reason for the modest increase in capex after 2024-25 is the saturating fund absorption capacity of central ministries, barring Railways, the first person said.
A strategy for meeting the fiscal consolidation target by 2025-26, including expected tax buoyancy—rate of tax collection growth over economic growth rate—and disinvestments will be specified in the budget documents, the person added. Among infrastructure sector ministries, Railways has multiple plans to strengthen its network and introduce high-speed trains, including bullet trains. These capital-intensive and long gestation projects would keep the growth appetite of Railways alive for a
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