NEW DELHI: Contrary to expectations that the NDA government would increase allocation towards capital expenditure (capex), Finance Minister Nirmala Sitharaman kept the same unchanged at Rs 11.11 lakh crore. It was in the interim budget in February this year that Sitharaman had proposed raising the capex by 11.1% year-on-year to Rs 11.11 lakh crore.“Significant investment the Central Government has made over the years in building and improving infrastructure has had a strong multiplier effect on the economy. We will endeavour to maintain strong fiscal support for infrastructure over the next 5 years, in conjunction with imperatives of other priorities and fiscal consolidation. This year, I have provided` 11,11,111 crore for capital expenditure. This would be 3.4% of our GDP,” said Sitharaman in her Budget Speech on Tuesday. Despite an 11.1% increase this year, the annual growth in capex allocation for the upcoming fiscal is the slowest in the past few years. India’s capex for FY24 was kept at Rs 10 lakh crore, a sharp jump of 37% from Rs 7.3 lakh crore in FY23. Between FY21 and FY22, the capex grew from 4.1 lakh crore to Rs 5.9 lakh crore. Sitharaman stated that the Centre would encourage states to provide support of similar scale for infrastructure, subject to their development priorities. A provision of Rs 1.5 lakh crore for long-term interest-free loans has been made this year to support the states in their resource allocation. Capital expenditure or capex means spending on infrastructure projects such as roads and railways. Around half of this year’s capex has been allocated for the Ministry of Road Transport and Highways (Rs 2.72 lakh crore) and Minister of Railways (Rs 2.52 lakh crore). Sitharaman also announced that the fourth phase of the Pradhan Mantri Gram Sadak Yojana (PMGSY) will be launched to provide all-weather connectivity to 25,000 rural habitations. While the government continue to believe that an increased capex is a ‘driver of growth and jobs’, the low participation of the private sector in infrastructure projects remains a concern. To address this, Sitharaman proposed viability gap funding and enabling policies and regulations. The FM said a market-based financing framework will be brought out. “The inclusion of Viability Gap Funding (VGF) in infrastructure development is crucial. While great progress has been observed in the development of roads, careful planning and execution of other projects are essential. With a strategic approach, these projects can drive significant economic growth,” said Ramendra Verma, Partner at Grant Thornton Bharat.
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