Keeping with expectations, the Union Budget for 2023-24 has continued the Centre’s thrust in recent years of capex-led growth strategy, bumping up the overall investment outlay by 33 per cent to ₹10-lakh crore over the ₹7.5-lakh crore budgeted in 2022-23.

This would be 3.3 per cent of GDP and will almost be three times the outlay in 2019-20, Finance Minister Nirmala Sitharaman said in her Budget speech on Wednesday, adding that this substantial increase 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.

The direct capital investment by the Centre is complemented by the provision made for creation of capital assets through grants-in-aid to States. The ‘effective capital expenditure’ of the Centre is budgeted at ₹13.7-lakh crore, which will be 4.5 per cent of GDP, she added.

Continued support

Sitharaman also announced continuation of support to State governments for capital investment, highlighting that the 50-year interest free loan to States will continue for one more year to spur investment in infrastructure and to incentivise them for complementary policy actions, with a significantly enhanced outlay of ₹1.3-lakh crore.

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Enhancing opportunities for private investment in infrastructure, Sitharaman said the newly established Infrastructure Finance Secretariat will assist all stakeholders for more private investment, including in railways, roads, urban infrastructure and power.

It was the Centre’s budgeted capital expenditure — which rose 2.7x in the last seven years from FY16 to FY23 — that reinvigorated the capex cycle. Going by the capex multiplier estimated for the country, the economic output of the country is set to increase by four fold.

‘Pleasant surprise’

Chandrajit Banerjee, Director General, Confederation of Indian Industry (CII), said the continued thrust on capex will boost the overall economic productivity, crowd in private investment and drive growth through a multiplier effect.

Arindam Guha, Partner, Leader-Government and Public Services, Deloitte India, said the significant increase in budgeted capex comes as a pleasant surprise. “Clearly the government is focusing on the high GDP growth multiplier effects of infrastructure spending. With States accounting for around 20-25 per cent of the overall infrastructure spend, the Budget has also considered an over 30 per cent increase in allocation to the special assistance scheme to States for capital investment,” he said.