Decoding The Capital Expenditure Budget: Motilal Oswal's Analysis

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy. .Motilal Oswal Report.Similar to the last two years, one of the most appreciated features of Union Budget 2023-24 has been the Government of India’s continued focus on improving the quality of expenditure by raising capital spending to Rs 10 trillion in FY24BE, up ~three times in just four years from Rs 3.4 trillion in FY20. If achieved, the GoI’s capital spending would jump to 3.3% of gross domestic product in FY24E, almost double of 1.7% of GDP during the pre-Covid period (FY18-FY20). However, three important adjustments are needed to understand the true extent of the investment push by the central government: Capital spending has two parts – capital outlays (or capex) and loans and advances. The central govt. has budgeted Rs 1.4 trillion (or 14%) of capital spending as loans and advances to the states, which should be subtracted from the Center’s capex, as it will be eventually be counted states’ capex. Central govt. has also included equity infusion totaling Rs 529 billion to Bharat Sanchar Nigam Ltd. in FY24BE under capex. Since such spending does not generate a large economic multiplier and thus, should not be included in the capex. Apart from GoI’s capex, the capital outlays of Central Public Sector Enterprises, excluding Food Corporation of India, must also be included to estimate the true investment plan of the central govt. This is more important since FY21, as the GoI has improved transparency by including off budget capex/borrowings of various CPSEs on its own books. As a result, while GoI’s capex is budgeted to increase next year, CPSEs’ capex will decline next year for the fourth successive year. After making these three adjustments, our estimates suggest that the combined capex is pegged to grow 20.7% YoY in FY24, following 8% growth in FY23RE..Click on the attachment to read the full report:.Budget 2023 Tailored To Boost Growth As Capacity Wins Over Consumption, Says Ridham Desai.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Decoding The Capital Expenditure Budget: Motilal Oswal's Analysis

Combined capex budgeted at 3.8% of GDP in FY24BE.

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