Budget 2024 | Growth in government capital spending is anticipated to drop to 10% in FY2015

Budget 2024 | Growth in government capital spending is anticipated to drop to 10% in FY2015

Budget 2024 | Growth in government capital spending is anticipated to drop to 10% in FY2015

Economists estimate the interim budget has set a capital spending goal of around Rs 11.2 lakh crore for 2024–25, according to a Moneycontrol study.

The Center has planned Rs 10 lakh crore for capital spending in 2023–24, which was 33.4% more than the 2022–2023 budget projection.

According to a Moneycontrol study of 15 analysts, government capital investment may face a substantial slowdown in 2024–2025. This week's interim budget is expected to devote around Rs 11 lakh crore for it.

Naturally, the Rs. 11 lakh crore capital spending plan for the next year would still mark a record high. Nonetheless, this would come in at around 10.3% more than the current fiscal year's budget projection of Rs 10 lakh crore, which is 33.4% more than the budget estimate for 2022–2023. In order to reduce the budget deficit and reach the medium-term goal of 4.5% of GDP by 2025–2026, the government's efforts to slow down the increase of capital expenditures are seen to be crucial.

Economists predict that the government would cut its capital spending to Rs 9.7 lakh crore from Rs 30,000 crore for the current fiscal year. Therefore, the Rs 11 lakh crore budget forecast for 2024–25 is a 13.4% increase above the previous estimate.

We believe that this fiscal deficit objective would permit budgeted capital spending of Rs 10.2 lakh crore in 2024–2025 (a comparable increase of around 10% year-over-year) based on our estimates of revenues and revenue expenditure. Is growth. According to analysts at rating agency ICRA, "each post-Covid year has seen an expansion of more than 20 per cent," and "higher capital expenditure" would be necessary to satisfy the budget deficit objective for 2025–2026. The center's capacity will be impacted by the volume.

FY25 Capital Expenditure Estimates for the Organization (in Rs lakh crore)

ICRA 10.2 Australia 10.5 First Bank IDFC 10.77 DBS Bank 10.9 Edge of Care 11.0 Deutsche Bank 11.0 Nomura 11.03 Institutional Equities at Kotak 11.22 Barclays 11.4 ICICI Bank 11.5 BofA Securities 11.5 Elara Capital 11.5 Financial Services Motorola Oswal 11.51

Baroda Bank 11.5–12.0

India received a 10.7.

The study indicates that the Center could think about cutting its budget deficit from 5.9% of GDP in the current fiscal year to 5.3% of GDP in 2024–2025.

The Center would stick to its capital spending plan, even at Rs 11 lakh crore. On the other hand, there have long been signs that the growth rate of capital expenditures may slow down. In reality, public capital investment may not increase as quickly as it has in previous years for two reasons, as Chief Economic Adviser V Ananth Nageswaran cautioned ahead of last year's Budget: Perhaps there's no need for it given private capital spending Spending is going up and staying up. The cost of capital might rise if governmental capital expenditures expand significantly.

The rise in capital expenditures seems to be slowing down already, which is why analysts think that the budget projection is off by Rs 10 lakh crore.

Sonal Verma and Aurodeep Nandi, analysts at Nomura, said that capital expenditure growth has slowed to less than 9% from 50.7% based on six-month rolling totals.

Based on the most recent statistics, the Center's capital spending goal for April–November 2023 is Rs 5.86 lakh crore, or 58.5 percent of the plan, which is below the necessary run-rate.

The distribution of capital expenditures for the next year is probably going to be dominated by roads and highways, railroads, and defense, in line with historical tendencies. Furthermore, this year's budget for the Special Assistance Scheme, which provides states with long-term, interest-free loans for capital spending, may be enhanced by Rs 1.3 lakh crore. States are adopting this plan later than they should, nevertheless.

"We expect states to avail of the opportunity will fall short by Rs 20,000-30,000 crore," said Madhavi Arora as well as Harshal Patel. States will thus need to spend more on infrastructure and capital projects even with increased funding next year. Economists at Emkay Global Financial Services said that their capacity to do so could be approaching its limitations.