Budget 2023-24: Centre hurtles along infra track with 33% capex hike

Making capital investment the centrepiece of the BJP government’s growth initiative, Finance Minister Nirmala Sitharaman on Wednesday (February 1) announced a 33 per cent increase in outlay to ₹10 lakh-crore, which works out to 3.3 per cent of the GDP. 

In her FY24 Union Budget speech, the FM said the newly set up infrastructure finance secretariat will assist in attracting more private investment. The new allocation is higher than the ₹7.5 lakh-crore budgeted for the previous year and the highest on record. Also, at 33 per cent, it is slightly lower than the previous year’s 35 per cent increase. In the previous budget, the capital expenditure saw an increase of more than 2.2 times the expenditure of 2019-20 and was 2.9 per cent of GDP in 2022-23. 

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“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,” Sitharaman said in her 90-minute budget speech. The direct capital investment by the Centre is complemented by the provision made for the 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. 

Sitharaman also said that 100 critical transport infrastructure projects, for last and first-mile connectivity for ports, coal, steel, fertiliser, and food grains sectors have been identified and they will be taken up on priority with an investment of ₹75,000 crore, including ₹15,000 crore from private sources. 

Railways capex

The Finance Minister announced that a capital outlay of ₹2.40 lakh-crore has been provided for the Railways, which is the highest ever outlay and about nine times the outlay made in 2013-14. 

A total of 50 additional airports, heliports, water aerodromes and advanced landing grounds will be revived for improving regional air connectivity.

Ranen Banerjee, Partner and Leader, Economic Advisory Services, PwC India, said: “The Union Budget ticks all the expected boxes viz. pump-priming the economy with 33 per cent higher capex allocation; pushing consumption by encouraging taxpayers to adopt the new tax regime with lower taxes and consume the additional money in hand rather than using savings to lower the tax burden in the old regime; and sticking to the fiscal consolidation path with the fiscal deficit target being brought down to 5.9 per cent. The highest tax rate on personal income has also been brought down to address concerns on the flight of HNIs.”

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The government has also decided to continue the 50-year interest-free loan to state governments 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. The newly established Infrastructure Finance Secretariat will assist all stakeholders with more private investment in infrastructure, including railways, roads, urban infrastructure and power, which are predominantly dependent on public resources. 

The Harmonized Master List of Infrastructure will be reviewed by an expert committee for recommending the classification and financing framework suitable for Amrit Kaal.  “Investments in Infrastructure and productive capacity have a large multiplier impact on growth and employment. After the subdued period of the pandemic, private investments are growing again. The Budget takes the lead once again to ramp up the virtuous cycle of investment and job creation,” Sitharaman said.