‘The national elections haven’t slowed down the Centre's capex plan in Q1'
interim budget, presented on 1 February, pegged a capex of ₹11.1 trillion for FY25, marking an increase from FY24's budgeted estimates of ₹10 trillion and revised estimates of ₹9.5 trillion. Higher capex is largely proposed for infrastructure sectors such as roads, shipping and railways. The capital allocation for these ministries has also been scaled up substantially in the budget, allowing them to complete work under the Vision 2027 plan.
Capital spending by the government has been on the rise since the pandemic, even as private sector investment remained tepid. Although private sector investment gathered some momentum in the current fiscal, economists recommended doubling down on government capital spending to help steer the economy through any turbulence, including a feared global slowdown in 2024. Presenting the budget proposals for FY25, the finance minister Nirmala Sitharaman said the capex outlay was 3.4% of GDP.
The capex is almost 3.3 times that in FY20. “The 11.1% growth may look lower than the previous four years but it is coming on the back of a higher base of last year. The Central capex was being provided to also trigger private sector investment and now we are seeing signs of private sector investment coming in," Sitharaman said during a post-budget press conference.
The infrastructure sector is set to become the biggest driver for the country that aspires to become a $5-trillion economy soon and a developed nation by 2047. Meanwhile, the Centre is also keen to maintain an optimum cash reserve, and it will evaluate plans to carry on more bond buybacks in coming months, the person mentioned above said. "Buybacks help to save on interest costs," the official said.
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