Capex raised to 3.4% of GDP despite fiscal consolidation

The central government's capital spending in 2024-25, according to the interim budget, will be ₹11,11,111 crore, a number which is more like an auspicious figure than a hardheaded budgetary allocation. Beyond this, perhaps numerologically significant allocation, the message is clear as far as the Narendra Modi government's fiscal priorities are concerned.

- Abhishek Jha

The government will continue its capex push if elected after the general elections. While a growing tax-GDP ratio will help this pursuit, capex will also be given a larger slice of the overall spending pie of the central government.

Fiscal numbers of the second Narendra Modi government speak for themselves. The share of capital spending in total expenditure of the central government has increased from 12.5% in 2019-20 to 23.3% in the 2024-25 interim budget. In terms of share in GDP, the respective numbers are 1.7% and 3.4%. The overall capital spending push, as seen in the effective capex, is even greater. This has increased from ₹5.2 lakh crore to ₹15 lakh crore during this period.

"While revenue expenditure is expected to be flattish, rising only 3% y/y, amid a falling subsidy bill, capital-expenditure growth remains the key priority, growing by 11.1% over prior budget estimates for FY2023-24", Rahul Bajoria, MD & Head of EM Asia (ex-China) Economics, Barclays said in a note.