The Infra Multiplier

The steep Budget allocation for FY24 capex is intnded to keep the GDP growth ticking. But has capex succeeded in creating the multiplier effect in the economy?

- ASHUTOSH KUMAR

TREASURY BENCHES of the Lok Sabha resonated with loud thumps on Budget day, the moment finance minister Nirmala Sitharaman announced a "steep increase" in FY24 central capital outlay to ₹10 lakh crore, up 33% from ₹7.5 lakh crore in FY23, in her Budget speech on February 1. While Prime Minister Narendra Modi thumped the desk, welcoming the move, fully aware that investment in infrastructure will serve as the key driver of domestic growth amid a slowing global economy, BJP legislators raised slogans in the name of Modi in the House. Congress party MPs, too, took to sloganeering in the name of Bharat Jodo - the ongoing party campaign led by Rahul Gandhi.

The din gave a chance to the finance minister to take a sip of water before resuming her speech. "The substantial increase in recent years is central to the government's efforts to enhance growth potential and job creation, crowd-in private investments, and provide a cushion against global headwinds," she added.

"The direct capital investment by the Centre is complemented by the provision made for creation of capital assets through grants-in-aid to states. The effective capital expenditure of the Centre is budgeted at ₹13.7 lakh crore, 4.5% of GDP," Sitharaman said in her Budget speech.

Experts have given a thumbs-up to the colossal capex plan. "We expected a 10-15% hike in allocation over FY23. Higher allocation is very encouraging. Clearly, there is a firm belief that infrastructure leads to a high GDP multiplier," says Arindam Guha, partner and leader, government and public services, Deloitte India.