Government spending to run private capital expenditure schemes

“With capital expenditure exceeding 4% of GDP and a major move to encourage various sectors such as agriculture, manufacturing, health, digital education and transition to clean energy, the budget will drive massive industrial growth,” said ThyssenKrupp Industries Vivek Bhatia, Managing Director and CEO, India said.

Bhatia said the creation of a more efficient freight corridor through additional 25,000 km of roads and the launch of the Integrated Logistics Interface platform will give a boost to the economy.

Finance Minister Nirmala Sitharaman, in her annual budget speech, said the government plans to invest trillions of rupees in the construction of public assets such as roads and housing in the year beginning April 1 to spur economic growth. The Economic Survey has projected FY13 growth to slow to 8-8.5% from the previous year’s estimated 9.2%. However, this year’s growth has come from a low base.

Sectors that could benefit from increased government spending include cement, infrastructure companies, metals and capital goods.

In a note last week, Aditya Birla Group chairman Kumar Mangalam Birla said the coming decade will be a capex celebration driven by the twin balance sheet problem of two engines, the conventional and the new economy, and backed by the resolution of the stressed. Debt and more leveraged corporates.

Of the total fixed investment in the economy, private sector investment comprises 35%. The rest comes from the central and state governments and public sector enterprises.

Morgan Stanley said, “In addition to using public capital expenditure in private capital expenditure, the government has also increased the lower corporate tax rate of 17% for new manufacturing firms till March 2024. With the PLI schemes, it will be part of private capex. There’s one more push.” In a note on Wednesday.

The power sector also benefits from an increased emphasis on green energy and increased outlay 24,000 crore to 19,500 crores. In addition, a basic customs duty of 40% and 25% on imported solar photovoltaic modules and cells will boost domestic manufacturing, making India a global manufacturing hub.

While analysts say large private companies are eager to deliver, due to continued demand uncertainty, the production-linked stimulus plan announced in the budget has the potential to arise. 2.5-3 trillion capex spread across 14 sub-schemes between financial years 2023 and 2025.

“This budget has thrown all its weight behind government-led capex in hopes of setting up a good investment cycle to lift growth. What it misses, however, is that the pull-out measures to address the short-term, hitherto uneven recovery, leaning against large sections of the population, especially in the informal sector, are still under pressure led by the pandemic. Under,” Crisil Research said in a note, adding that the Indian economy is on a rapid growth trajectory, two years and three waves away from the pandemic.

Analysts at brokerage firm Emkay Global said the Budget emphasized capex at 2.9% of GDP to help crowd out the missing private sector, believing private capex is endogenous and kick-started. Starting out requires some visible consumption demand on the ground.