Theranautilus Secures $1.2 Mn in Seed...
19 Nov 2024
The challenge of capital expenditure (Capex) has come into focus with substantial investments made by the Central government in recent years. Between FY22 and FY24, the government allocated Rs 22.77 lakh crore towards capital expenditure to mitigate economic challenges post-Covid-19, significantly surpassing the Rs 13.28 lakh crore spent in FY18-FY22. This has made the budgetary allocation a key figure of interest among India Inc. and policy analysts.
However, a closer examination reveals several concerns despite the large-scale investments. Firstly, the share of Central Capex in GDP remains low. Secondly, Gross Fixed Capital Formation (GFCF) in the economy is below historical trends. Thirdly, there is a notable imbalance in expenditure, heavily favoring highways and railways.
Since the shift from plan to non-plan categorization in FY18, actual capital expenditure has varied, with recent years showing a range of 2.5% to 2.79% of GDP, falling short of the desired 5% for optimal economic impact, according to experts.
The interim budget allocated Rs 11.11 lakh crore for FY25, approximately 3.4% of projected GDP, indicating an increase but still below ideal levels for economic stimulus. GFCF as a share of GDP has also declined compared to past highs, posing additional economic challenges.
While infrastructure spending increased post-Covid-19, totaling Rs 33.88 lakh crore from 2021 onward, much of this funding was concentrated in highways and railways, comprising nearly half of total infrastructure spending.
Moving forward, there is a need for balanced investment across sectors like housing, energy, urban connectivity, and manufacturing. Encouraging private sector participation through PPP models and fostering investment ecosystems around existing projects will be crucial for sustained infrastructure development.
In conclusion, while recent Capex efforts are commendable, addressing these imbalances and expanding investment scope are essential for broader economic growth and resilience.
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