Budget 2023: FM announces effective capex of Rs 13.7 lakh crore, 4.5% of GDP for FY24

Finance Minister Nirmala Sitharaman announces capital investment outlay of Rs 10 lakh crore for FY24 in Budget 2023.

capex, Budget 2023, Budget speech
Budget 2023: FM announces highest ever capital outlay for Railways at Rs 2.4 lakh crore, about nine times the outlay made in FY 2013-14.

Finance Minister Niramala Sitharaman in Budget 2023 increased the capital investment outlay to 33% to Rs 10 lakh crore for FY24, which would be 3.3% of GDP. The effective capital expenditure (Capex) will be Rs 13.7 lakh crore, 4.5% of GDP, said Sitharaman in her Budget speech. The FM also announced the highest ever capital outlay for Railways at Rs 2.4 lakh crore, about nine times the outlay made in FY 2013-14, which is a big step in modernising rail mobility and connectivity, according to Sudin Sabnis, Partner, Nangia Andersen LLP. The government will extend interest-free loans to states by one year.

FM in her speech also added that 50 additional airports will be developed to improve regional connectivity. Note that for the current financial year, India had set a capex target of Rs. 7.5 lakh crore, a 35.4% increase from the budget estimate of Rs 5.5 lakh crore in fiscal 2022. The target included Rs 1 lakh crore as a capex-only, interest-free loan to states for 50 years. The central government hopes for economic recovery through the wide multiplier effect of public capex which can create more jobs, as well as spur demand, which can lead businesses and industry to spend more money on capital expenditure.

FM also announced that a scheme will be launched with effect from January 1st, 2023 to supply free foodgrains in the next 1 year. The government will bear a capex of Rs 2 lakh crore. “Continuing our commitment to ensure food and nutritional security, we are implementing from 1st January 2023, a scheme to supply free food grains to all ANTYODAYA and households for the next 1 year under Pradhan Mantri Garib Kalyan Anna Yojana. The entire expenditure of about Rs 2 lakh crore will be borne by the central government,” the FM said.

It is worth mentioning that to combat the sluggish private capex, the government has been trying to create a virtuous cycle by successively increasing public capex, the spending on infrastructure such as roads and railways. The capex boost is being done in the hopes of crowding in private capex which is necessary for putting slipping economic growth back on track, especially after the pandemic which devastated consumer demand.

“Capex outlay increased by 33% to Rs 10 lakh crore for FY24. At this level, public capex will be 3.3% of GDP. Equity indices are in the green so far. But bond markets are getting jittery as expenditure looks elevated so far. 10-year bond yield has climbed 2 basis points to 7.38% since the FM announced the hike in capex outlay. A lower fiscal deficit will cool bond markets,” said Satish Menon, Executive Director at Geojit Financial Services.

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First published on: 01-02-2023 at 11:55 IST