Capex plans to cool after FY25 as govt chases deficit goal

After an expected spurt in the next fiscal year, government capital expenditure (capex) may grow at a more sedate pace in the years ahead as the Centre sets its sights on fiscal consolidation, two people aware of the plans said.

- Gireesh Chandra Prasad, Subhash Narayan 

The Union government may boost capex allocation by 25% to a record ₹12.5 trillion in 2024-25, Mint reported in November. However, the Centre is also keen to bring the fiscal deficit below the targeted 4.5% by 2025-26.

Accordingly, it prefers a more moderate capex growth after 2024-25, one of the two people said on the condition of anonymity. By then, private investments are expected to do the heavy lifting as well.

"The fiscal consolidation target is sacrosanct," the person said. While the government's capex will continue to increase after 2024-25 in absolute terms, the rate of increase will not be as steep as it is now, the person added.

Meeting the fiscal consolidation target is difficult, but not impossible, said the second person, adding the government could bring down fiscal deficit from 9.2% in 2020-21 to 6.4% in 2022-23.