India's Interim Budget 2024 prioritises Capex

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Last Updated03/02/2024

India's economic recovery post-COVID-19 was marked by robust performance in exports and domestic investments.
Global supply chain easing and a structural rise in services exports and domestic investments fueled the export growth.

The National Statistical Office estimates that India's investment ratio improved to 29.8% of GDP in FY23-24, up from the recent low of 27.3% in 2020-21.
India ranks fourth globally for the most significant improvement in the investment ratio.

The FY25 Interim Budget continues the emphasis on public capital expenditure, setting a record high of ₹11.11 trillion.
- It is equivalent to 3.4% of GDP, the highest in two decades.
Economic services receive the majority, with hard infrastructure sectors like roads and railways being significant beneficiaries.

Major economic rail corridors are identified under the PM Gati Shakti program, enhancing logistics efficiency.
Defence capex sees a record allocation of ₹1.72 trillion, supporting the Atmanirbhar Bharat campaign.
A new scheme for deep-tech technologies for defence is also introduced.

Loans and advances are expected to increase to ₹1.71 trillion in FY25, facilitating state-level capex.
- States contribute significantly to general government capex.
The housing sector receives attention, expanding PM Awas Yojana (Grameen) to include two crore additional houses.
Green energy ambitions are integrated into the capex plan, promoting rooftop solarisation for one crore households.
Despite the focus on government capex, there is a slowdown in spending by public sector enterprises (PSEs).

The high point of the budget is fiscal consolidation, with a fiscal deficit target of 5.1% of GDP in FY25, lower than consensus expectations.
Gross G-sec borrowing is expected to moderate to a three-year low of ₹14.13 trillion. * This will potentially benefit the private sector with improved availability of lendable resources.