Increase In Capex To Ensure Growth Momentum: Experts

With Viksit Bharat by 2047 as its vision, the interim budget presented by the Union Finance Minister focused on many different areas with particular emphasis on capital expenditure. The Government demonstrated its strong resolve to keep India’s growth prospects and the tag of world’s fastest growing economy intact.

The Government has allocated Rs. 11.11 lakh crore on infrastructure outlay in the financial year 2025. This amount is an 11.1 per cent increase from the budget allocation to capital expenditure in the financial year 2024. In financial year 2025, the capital expenditure by the Government will be 3.4 per cent of the total GDP (Gross Domestic Product). 

Speaking on the development, Ajay Sawhney, Partner, Cyril Amarchand Mangaldas said, “Capex outlay for next year increased by 11.1 per cent undoubtedly represents that the growth momentum will continue, considering this is an election year. This increase is coming from a position of confidence. Infrastructure spending has a higher multiplier effect across the ecosystem and is a must to continue reviving demand in the economy. I believe the announcement is positive bearing in mind that intention also was to maintain fiscal discipline.”

With impending General Elections 2024, what everyone expected was an interim budget replete with populist measures. However, the Finance Minister’s budget speech was focused on key areas like infrastructure, housing, employment generation, health, tourism, agriculture and production linked incentive schemes (PLI).

The emphasis to continue with huge spending on infrastructure, this move by the Finance Ministry will bolster private spending as well and give impetus to animal spirits of the Indian economy. The increase in private investment will further lead to an overall elevation of the national economic condition.

Speaking on the capital expenditure of the Government in financial year 2025, Prem Rajani, Managing Partner, Rajani Associates said, “Based on the announcements towards Capex, it would be good to monitor developments within sectors such as engineering, construction, and related industries. However, the announcements could incentivise private sector participation in infrastructure projects through public-private partnerships. Owing to the lucrative business opportunities, we could see significant activities, transactions, and deals within sectors that support tourism, logistics, railways, supply chain, and port connectivity.”

The Government’s commitment to gradually increase its capital expenditure and maintain its focus on infrastructure will improve investor sentiment and boost investment manifold.