Budget 2023: Capital expenditure hiked by 33% to Rs 10 lakh crore for FY24

Finance Minister Nirmala Sitharaman in her Budget 2023 speech n February 1 announced that the government has increased capital expenditure for FY24 steeply by 33 percent to Rs 10 lakh crore, which would be 3.3 percent of India's Gross Domestic Product (GDP).

The effective capex will be Rs 13.7 lakh crore; forming 4.5 percent of GDP, Sitharaman added.

The spending push is critical for crowding in private investments, which could see some hesitancy as pent-up demand slows in the next fiscal.

Follow all updates on FM Sitharaman's Budget 2023 speech here

This is in line with the previous budget that saw a bumper hike in the Centre’s capex plans, aimed at pump-priming the economy, reeling under the COVID shock.

Road and other infrastructure projects can spur economic activity, boost construction and create jobs. The segment accounts for about 8 percent of GDP and is the largest creator of direct and indirect employment, employing about 40 million people.

It has a strong multiplier effect with major forward linkages to sectors like real estate, infrastructure and manufacturing and backward linkages to steel and cement, among others.

The move to hike capex is not only expected to increase opportunities for private companies to participate in infrastructure projects, such as new roads and highways and railways, but will create opportunities in other social welfare sectors like drinking water and housing projects.

The capital spending push will also induce demand for services and manufactured inputs from large industries and micro, small and medium enterprises (MSMEs), while helping farmers through better infrastructure.

Last year’s Union Budget had set the course for more collaborative play with states in infrastructure creation through a seven-fold increase in capital allocation to Rs 1 lakh crore. However, it also underlined the need for states to invest in capacity building for project preparation, if they were to gain maximum benefits.