Centre likely to push ahead with high capital expenditure in FY23

The Centre is likely to press ahead with its high capital expenditure plan in the upcoming budget to counter a slowdown in the global economy that may affect India's economic recovery officials, according to the deliberations told ET. key infrastructure ministries may see a substantial increase in allocation while others may see modest increases. A balanced approach will be central to the budget even though it will be this government's last full budget, as revenues next year are unlikely to be as buoyant and the turbulence in the global economy is expected to have an impact on India, an official said. The next general election will be held in April-May 2024. The FY 23 budget had stepped up capital expenditure by 35.4%, leaving aside nearly a fifth of the total budget for infrastructure sectors. In FY 22 total capital expenditure is projected to increase from 2.5% of GDP to 2.9% of GDP in FY 23. The Centre spent 45.7% of the total allocation in the first six months of the fiscal year. The budget will be announced on February 1. There is a chance that capital expenditure allocation will be bumped up, including a separate line of credit for states, of about 20 -- 25% in the budget. There would not be a compromise on capex because that would be needed to support the economy, said another official, adding that the government would push ahead with balanced spending without splurging. The infrastructure push and capacity to absorb large funds is likely to see an increase in the allocations of railways, roads, and ports. A higher allocation to these sectors is needed to support the Gati Shakti programme. The digital platform brings together 16 ministries for the coordinated implementation of infrastructure connectivity projects. A third official said that the annual allocation of other social sector ministries is likely to be up 15 -- 20% depending on their utilisation in FY 23, up 15 -- 20%. The finance ministry has told ministries to go ahead with their spending plans, the official said. In their pre-budget discussions with finance minister Nirmala Sitharaman on Monday, economists suggested that the government step up capital expenditure. High capital spending has supported economic growth and started to spur private investment revival. Economists believe that this support will be crucial next year when the Indian economy will face the full force of the global slowdown and the near recession in the developed world. The International Monetary Fund expects that India's growth will drop to 6.1% in FY 24, from an estimated 6.8% in the current year. We expect the government to continue its focus on capital spending and see signs of a nascent investment recovery, Goldman Sachs said earlier this month.