Economy News

A high investment budget likely to offset the global crisis – Mintpaisa

The Center is likely to continue with its high capital spending plan in the next budget to counter an increasingly severe global downturn that could hurt India’s economic recovery, officials familiar with the deliberations told ET.

Key infrastructure ministries may see a substantial increase in allocation while others may see modest increases.
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A “balanced approach” will be at the heart of this budget, even though it will be this government’s last full budget, as next year’s revenue is unlikely to be as buoyant and the turbulence of the global economy is expected to have some impact on India, an official said. The next general elections will take place in April-May 2024.

The FY23 budget had increased capital spending by 35.4%, reserving nearly one-fifth of the total budget for infrastructure sectors. Total capital expenditure is expected to increase from 2.5% of GDP in FY22 to 2.9% of GDP in FY23. In the first six months of the fiscal year, the Center has spent 45.7% of total allocation. The budget is expected to be announced on February 1. The capital expenditure allocation is expected to increase again, including a separate line of credit for states, by around 20-25% in the budget.

no madness

“There would be no compromise on capital expenditure as it is essential to support the economy,” another official said, adding that the government would pursue balanced spending without splurging. Railways, roads and ports are likely to see a significant increase in their allocations, in line with the infrastructure push and their ability to absorb large funds.


A higher allocation to these sectors is also needed to support the Gati Shakti program. The digital platform brings together 16 ministries for the coordinated implementation of infrastructure connectivity projects. The annual allocation for other social sector ministries is expected to increase by 15 to 20 percent, depending on their use in FY23, a third official said.

The finance ministry has asked ministries to continue with their spending plans, the official said.

Pre-budget discussions

In their pre-budget talks with Finance Minister Nirmala Sitharaman on Monday, economists suggested the government should increase capital spending. Strong investment spending supported economic growth and started to trigger a revival of private investment.

Economists say this support will be crucial next year when India’s economy faces the full brunt of a global slowdown and near-recession in the developed world. The IMF expects India’s growth to slow to 6.1% in FY24 from an estimated 6.8% in the current year. “We also expect the government to continue to focus on capital spending and see signs of the nascent recovery in investment continuing,” Goldman Sachs said in a report earlier this month.


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