In the upcoming interim budget on February 1, Indian Railways is expected to receive a significant boost in capital expenditure, signaling a potential transformation of the national transportation system. Finance Minister Nirmala Sitharaman may allocate Rs 2.8-3 lakh crore to sustain the momentum of capital expenditure, compared to the Rs 2.4 lakh crore provided in the 2023-24 Budget Estimate.
In the 2023-24 fiscal year, the budgetary support was approximately Rs 1.6 lakh crore, with a capital allocation of around Rs 2.45 lakh crore. The gross budgetary support increased to Rs 2.4 lakh crore, while the total capital allocation reached Rs 2.6 lakh crore.
Analyst expectations and focus on modernisation
Analysts anticipate a substantial increase in capital expenditure, reflecting the government’s heightened focus on modernising railways. Credit rating agency ICRA states, “We expect adequate allocations towards the infrastructure sectors such as roads, highways, and railways in 2024-25.” The government’s emphasis on developing and producing emerging technologies in the defence sector may also result in enhanced outlays for research and development.
Elara Capital analysts noted the government’s prioritisation of capital spending, particularly in railways, roads, and defence. This emphasis is expected to persist, albeit at a moderate pace, reflecting the government’s commitment to infrastructure development.
Expectations from the aviation sector
The aviation sector in India has experienced substantial growth, with the Ministry of Civil Aviation targeting a doubling of domestic air passenger traffic from 15 crore to 30 crore by 2030. The Union Budget 2023-24 included plans for the construction of fifty additional airports and heliports to enhance regional air connectivity.
Passenger traffic is expected to grow at a Compound Annual Growth Rate (CAGR) of 14 percent from FY 23-25. The share of passenger traffic at non-metro airports has increased from 32 percent in FY15 to 40 percent in FY23. The burgeoning middle and upper-middle class in tier-2 and tier-3 cities, coupled with a projected GDP growth of 6.5-7.0 percent, is anticipated to drive increased air travel.
Civil aviation players are hopeful for budgetary announcements that improve allocations for training institutes, address the gap between supply and demand, and provide tax relief on Aviation Turbine Fuel (ATF) for airline viability. Additionally, fiscal incentives for Research and Development (R&D) and manufacturing of Maintenance, Repair, and Overhaul (MRO) items in India under the Make in India campaign are anticipated.