Gunning for Growth Amid Global Shifts

Govt should increase capex spending by 10-15% and take steps to boost consumption

- Rajiv Memani

India has been the fastest-growing large economy in the world post the covid pandemic. This period has been marked by policy stability and macro-fiscal discipline—the fiscal deficit is expected to come down to under 4.9% in FY25 and the quality of deficit has improved. While revenue expenditure was contained and rationalized by the Union government, capital spending grew 27% and 28% in FY23 and FY24. However, private capex has not happened at the pace that was expected and the high growth in government capex has driven the overall economic growth.

Looking ahead, the government would need to continue to contain the fiscal deficit while also ensuring high growth of GDP. Higher levels of capex, especially private capex, and attracting greater amounts of FDI can help accelerate growth.

As the Union budget is formulated for the next fiscal, the ₹2.11 trillion one-time RBI dividend that the government received for FY25 may not be available. Despite this absence, the government should provide for a 10-15% increase in capex spending and also look at measures that can provide a boost to consumption. Such a scenario would require revenue augmentation measures.