THE MEGA INFRA PUSH

The Union Budget 2023 has proposed a 10 lakh crore capex to kick start the private investment cycle. But it faces a Herculean task given weak external sectors, inflation and global recessionary clouds

In his book, ‘The Audacity of Hope’, former US President Barack Obama in 2006 outlined his vision for America and the world. One of the key themes of the book is investments in infrastructure such as roads, bridges, and public transportation to create jobs and boost economic activity.

Overall, his book provides a broad framework for thinking about economic policy, emphasizing the importance of infrastructure, progressive taxation, and support for small businesses and entrepreneurship.

The Union Budget FY23 presented by Finance Minister Nirmala Sitharaman echoes similar sentiments as it embarks on a record, unprecedented capital expenditure on infrastructure building to boost growth and bring India out of the middle-income country trap and make it a developed nation, which is not possible without over 8% GDP growth for a sustained period.

The larger theme of Union Budget 2023-24 is a big bet on capex to deliver trickle-down benefits, create jobs, boost incomes and lift economic growth, all while maintaining fiscal deficit targets.

HOW BIG IS THE GOVERNMENT’S CAPEX BET?

The central government plans to spend 10 lakh crore on capital expenditure in 2023-24, which is more than three times the spend five years ago and double from ₹4.26 lakh crore expenditure in 2020-21.

This is the third consecutive year of increase in capital investment outlay, which also includes an enhanced transfer to the tune of ₹1.3 lakh crore to states in the form of interest-free loans.

The 65 bps increase in capex-GDP is the biggest quantum of increase since FY08 (77bp). The FY24 capex would also account for the highest share of total expenditure, at 22%, in the last 15 years and a 10 percentage point increase compared to pre-pandemic levels in 2019-20.