'BOLD' CAPEX A TRIGGER FOR PRIVATE FLOWS

Finance Minister Nirmala Sitharaman's capital expenditure plans with an outlay pumped up by 11.1 per cent for FY25, to Rs 11.1 lakh crore, is an exercise of command, control, and clairvoyance over public finance.

- NIVEDITA MUKHERJEE

The targeted expenditure aligns with the Government's steadfast commitment to economic growth and an ambitious roadmap for unprecedented growth till 2030 as it looks to return to power. "The Interim Budget for FY25 has kept up focus on capital expenditure given its high multiplier effect, and the government has substantially bolstered such spending in recent years to first nurse a Covid-ravaged economy back to health and thereafter to sustain the high growth rate," said Sitharaman on Thursday.

Arguably, the Government's focus and statement on capital expenditure has been the subject of intense anticipation, scrutiny, interest and optimism across the decade of governance with FY14 to FY24 witnessing over fivefolds (RE) increase in India's budgeted capital expenditure, without any heating-up of the economy. The sentiment resonates among economists and analysts. Aurodeep Nandi, India Economist, Nomura describes the commitment to a significant FY25 capex spend of 3.4 per cent of GDP and a capex target of Rs 11.1 lakh crore with 11.1 per cent increase, as "very bold and forward looking step". Demonstrating the Government's commitment to infrastructure development and aligned to the assistance for production and manufacture of electric mobility, Nandi says, "The capex outlay as positioned to continue its innings as one of the key drivers of growth." 

Fitch Ratings too assesses the continued emphasis on capex investment, with a further 11 per cent spending increase as supportive of the growth outlook in FY25, which it pegs at 6.5 per cent. Strong capex should, if implemented as planned, reduce infrastructure bottlenecks and improve medium-term growth potential. “We believe India is well-placed to sustain higher rates of growth in the medium term relative to many of its peers, with the capex drive helping to underpin this view,” says a Fitch Ratings expert.