Budget 2023: Government's Capex Hiked By 33% To Rs 10 Lakh Crore For FY24

The central government continued its focus on capital expenditure for 2023-24 to aid economic recovery at a time private investment are yet to show clear signs of revival.

The government capital expenditure for FY24 is pegged at Rs 10 lakh crore, forming about 3.3% of the GDP, Finance Minister Nirmala Sitharaman said in her Budget 2023 speech. This is higher than the capex allocation of Rs 7.5 lakh crore as per the budget estimate for FY23. The revised estimate for FY23 capital expenditure stood at Rs 7.28 lakh crore.

"This substantial increase in recent years is central to the government’s efforts to enhance growth potential and job creation, crowd in private investments, and provide a cushion against global headwinds," Sithraman said.

The ‘Effective Capital Expenditure’ of the centre is budgeted at Rs 13.7 lakh crore, which will be 4.5% of GDP, the minister said.

According to details provided in the budget documents, railway expenditure through budgetary support is estimated at Rs 2.4 lakh crore in FY24. This is 51% higher than the FY23 revised estimates of Rs 1.59 lakh crore.

"This highest ever outlay is about nine times the outlay made in 2013- 14," FM Sitharaman said in her speech.

While budgetary capex has increased, public sector capex (which includes spending by government-owned enterprises) needs to see higher growth, especially in the absence of a rise in major private capex, Suvodeep Rakshit, senior economist at Kotak Institutional Equities and Upasna Bhardwaj at Kotak Mahindra bank, said in a pre-budget note. Defence, railways, and roads are expected to be the primary routes for budgetary capex increase, they wrote.

"We think total spending on public infrastructure projects—logistics, technology, infrastructure or public utilities—will only grow in the next two to three years," Rahul Bajoria, chief economist at Barclays had said in a note last month. "In particular, ahead of the 2024 general election, we think several large public projects are likely to be announced and started."

Funds are also expected to be redirected from programmes such as last year’s vaccination drive towards capital spending, perhaps targeting the healthcare sector, along with continuing support to production-linked incentives, Bajoria had said. Apart from budgeted capex, resources of public enterprises will likely continue to be used to fund capital projects, similar to the past few years, though this funding channel is being steadily decreased, he said.