Outlay for capital expenditure increased by 35.4% to 7.5 lakh crore in 2022-23, says Finance Minister Nirmala Sitharaman
Finance Minister Nirmala Sitharaman, in Union Budget for 2022-23The U.S. has bet on public capital expenditure to accelerate the investment cycle and accelerate India’s economic recovery from the pandemic by 2022-23.
Read also: Union Budget 2022 highlights
The central government’s ‘effective capital expenditure’ is projected to be ₹10.68 lakh crore in 2022-23, or about 4.1% of GDP, factoring in grants-in-aid to states to create capital assets, Ms Sitharaman said. This is 27% higher than the revised estimate of ₹8.4 lakh crore for the current year, which is almost 28% higher than the 2020-21 allocation for such capital expenditure.
India’s economic recovery continues to be bolstered by multiplier effects from the sharp increase in public investment in last year’s budget, the minister said, adding that a rapid and sustained revival in capex is the key to job creation.
The capital expenditure push will also drive demand for services and manufactured inputs from large industries and micro, small and medium enterprises (MSMEs), while helping farmers through better infrastructure.
“The economy has shown strong resilience to come out of the impact of the pandemic with high growth. However, we need to maintain that level for the 2020-21 shock,” she said.
While the Economic Survey, presented on January 31, noted that a nascent private investment is underway, the finance minister said they still need support to meet their potential and the needs of the economy. “Public investment should continue to take the lead and pump-prime into private investment and demand in 2022-23,” he said.
The Centre’s own expenditure on capital account is being raised to ₹7.50 lakh crore from the coming year, which Ms Sitharaman emphasized is 2.2 times more than the outlay in 2019-20. In Budget 2021-22, ₹5.54 lakh crore was allocated for capital expenditure, which has been increased to about ₹6.03 lakh crore in the Revised Estimates.
NK Singh, chairman of the Fifteenth Finance Commission, said, “There is a great need for a sharp increase in capital expenditure, especially focused on infrastructure, and efforts to increase digital connectivity in all villages.”
However, he was a little disappointed that the BharatNet project to connect all villages would now be ready by 2025 as indicated in the budget speech. “They should have taken some measures to expedite it,” he said.
“The Union Budget for 2022-2023 underscores the Government of India’s previous emphasis on capital expenditure to sustain a near-term recovery from the pandemic, as well as pave the way for a long-term restructuring of the economy,” said senior vice president Christian said de Guzman.—Chairman, Sovereign Risk Group, Moody’s Investors Service.
While the intention to revive the investment cycle is noteworthy, the pace of implementation of public expenditure projects remains a source of concern. For example, in 2021-22, till December, several central public sector enterprises as well as the ministries in charge of capital expenditure were struggling to meet this year’s targets.
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