Business
Budget 2024: How Modi government’s unprecedented capex push in last year’s budget has helped
[ad_1]
Budget 2024: Finance Minister Nirmala Sitharaman will present the Interim Budget 2024 in the Parliament on February 1, 2024. The Narendra Modi-led NDA government pushed for a massive capex stimulus for the economy in the previous Budget.
On February 1, 2023, during her speech, Sitharaman unveiled a substantial capital expenditure initiative, aiming to stimulate economic growth, with an allocation surpassing 3 percent of the nation’s GDP.Approximately Rs 10 lakh crore was earmarked for capital expenditure, reaching a historic peak. Analysts described it as a package that would guarantee the continuity of India’s cyclical recovery.
The government is relying on the multiplier effect of this capex, with the Finance Ministry characterising the capex push as a crucial step in the pursuit of making India a $5 trillion economy.
The substantial increase in the government’s capital expenditure, rising from Rs 4.1 lakh crore in FY21 to the budgeted Rs 10 lakh crore in FY24 (BE), has not only fostered growth but has also triggered the influx of private sector investment, as per a ministry official quoted by ET.
In the subsequent GDP growth readings, analysts identified the government’s capital expenditure push as one of the primary catalysts for the country’s economic growth.
Data released by the Finance Ministry in December indicated that capital expenditure by CPSEs reached approximately 52 per cent of the Budget target, amounting to Rs 3.79 lakh crore in the first half of the current financial year. This surpasses the capital expenditure by CPSEs during the April-September period of the previous financial year.
India’s Gross Fixed Capital Formation (GFCF) to GDP ratio reached its highest point in FY20 and has since risen by 270 basis points. However, it still lags behind its previous peak, which occurred in 2010, by 500–600 basis points. According to a Jefferies research report cited by IANS, the expansion of all three components of the capex cycle—housing, corporate capex, and government capex—positions India to be less affected by a potential global slowdown.
Capital expenditure (Capex) has surged by 11% to 9.5% year-on-year in the second quarter and first half of the financial year 2024. The expansion of India’s growing investment cycle is apparent, indicating substantial potential for further growth. Capex, as a percentage of nominal GDP, is projected to reach nearly a decade-high at 30% in the fiscal year 2024, the report said.
“We believe though, there is a long way to go in the capex cycle. From the capex cycle peak of GFCF being at 35 percent of GDP, the investment share in the economy declined to a low of 27 per cent in FY21,” the report added.
Budget 2024 FAQs:
What was the capex allocation in the Union Budget 2023?
In the Union Budget for the fiscal year 2023, Finance Minister Sitharaman earmarked Rs 10 lakh crore for capital expenditure (capex).
Budget 2024: What are the various parts of a capex cycle?
The Gross Fixed Capital Formation (GFCF) is influenced by three primary contributors: households, government, and corporate.
When will the Budget be announced?
Finance Minister Nirmala Sitharaman is set to unveil the Interim Budget for the fiscal year 2024 on February 1, 2024.
On February 1, 2023, during her speech, Sitharaman unveiled a substantial capital expenditure initiative, aiming to stimulate economic growth, with an allocation surpassing 3 percent of the nation’s GDP.Approximately Rs 10 lakh crore was earmarked for capital expenditure, reaching a historic peak. Analysts described it as a package that would guarantee the continuity of India’s cyclical recovery.
The government is relying on the multiplier effect of this capex, with the Finance Ministry characterising the capex push as a crucial step in the pursuit of making India a $5 trillion economy.
The substantial increase in the government’s capital expenditure, rising from Rs 4.1 lakh crore in FY21 to the budgeted Rs 10 lakh crore in FY24 (BE), has not only fostered growth but has also triggered the influx of private sector investment, as per a ministry official quoted by ET.
In the subsequent GDP growth readings, analysts identified the government’s capital expenditure push as one of the primary catalysts for the country’s economic growth.
Data released by the Finance Ministry in December indicated that capital expenditure by CPSEs reached approximately 52 per cent of the Budget target, amounting to Rs 3.79 lakh crore in the first half of the current financial year. This surpasses the capital expenditure by CPSEs during the April-September period of the previous financial year.
India’s Gross Fixed Capital Formation (GFCF) to GDP ratio reached its highest point in FY20 and has since risen by 270 basis points. However, it still lags behind its previous peak, which occurred in 2010, by 500–600 basis points. According to a Jefferies research report cited by IANS, the expansion of all three components of the capex cycle—housing, corporate capex, and government capex—positions India to be less affected by a potential global slowdown.
Capital expenditure (Capex) has surged by 11% to 9.5% year-on-year in the second quarter and first half of the financial year 2024. The expansion of India’s growing investment cycle is apparent, indicating substantial potential for further growth. Capex, as a percentage of nominal GDP, is projected to reach nearly a decade-high at 30% in the fiscal year 2024, the report said.
“We believe though, there is a long way to go in the capex cycle. From the capex cycle peak of GFCF being at 35 percent of GDP, the investment share in the economy declined to a low of 27 per cent in FY21,” the report added.
Budget 2024 FAQs:
What was the capex allocation in the Union Budget 2023?
In the Union Budget for the fiscal year 2023, Finance Minister Sitharaman earmarked Rs 10 lakh crore for capital expenditure (capex).
Budget 2024: What are the various parts of a capex cycle?
The Gross Fixed Capital Formation (GFCF) is influenced by three primary contributors: households, government, and corporate.
When will the Budget be announced?
Finance Minister Nirmala Sitharaman is set to unveil the Interim Budget for the fiscal year 2024 on February 1, 2024.
#Budget #Modi #governments #unprecedented #capex #push #years #budget #helped
