India will continue to remain the fastest-growing economy in the world in the coming financial year, said Economic Survey 2023 ahead of Union Budget. According to the document, GDP growth will be driven by higher capital expenditure (capex), private consumption, credit growth to small businesses, strengthening corporate balance sheets, and return of migrant workers to cities. Of these drivers, capex is expected to be a key fuel to the growth. The government, in recent years, provided an increased impetus for infrastructure development and investment through the enhancement of Capex.
Capital Expenditure: Highlighting the fast growth of India’s Capex in recent times, the Economic Survey said that going by the capex multiplier estimated for the country, the economic output of the country is set to increase by at least four times the amount of capex. Note that the outlay for capital expenditure in 2022-23 was increased sharply by 35.4% from Rs 5.5 lakh crore in the previous year (2021-22) to Rs 7.5 lakh crore, of which approximately 67% has been spent from April to December 2022. Data shows that India’s total Capex grew at an average rate of 13% during FY12 and FY22.
States to step up: This was another growth driver of the Indian economy, crowding in the private capex since the January-March quarter of 2022, the Survey noted. Indian states are also performing well with their capex plans. “Like the central government, states also have a larger capital budget supported by the centre’s grant-in-aid for capital works and an interest-free loan repayable over 50 years,” the survey said, adding that on the current trend, it appears that the full year’s capex announced in the Budget 2022 will be met.
Infrastructure push: According to the survey, government’s capex push can be seen in the infrastructure-intensive sectors like roads and highways, railways, and housing and urban affairs and has longer-term implications for growth “While on the one hand, capital expenditure strengthens aggregate demand and crowds-in private spending in times of risk aversion; it also enhances the longer-term supply-side productive capacity,” the survey said. Investing in high-quality infrastructure is crucial for accelerating economic growth and sustaining it in the long run,” according to the Economic Survey 2022-23.