A giant leap to bridge Infra gaps: 10 lakh cr spend to include enhanced credit support for states, funds for critical infra upgrade

The budget unveiled one of the biggest jumps in capital spending in over a decade that includes enhanced credit support to states and focused spending for critical infrastructure upgrade. Finance minister Nirmala Sitharaman raised the proposed capital spending for FY24 by a whopping 33% to `10 lakh crore, or 3.3% of GDP.
This will be spent on building highways, developing railway infrastructure, laying optical fibre lines and other large development projects aimed at public good. The minister said the 50-year interest-free loans to states would continue for another year to spur investment with an enhanced allocation of `1.30 lakh crore under the programme from about `1 lakh crore in the current fiscal year.

She had allocated `7.5 lakh crore for capital spending in FY23 and more than 60% of that had been spent till December-end. Economists say the ramp up in capex would help address India’s infra gap and also support growth at a time when the global economy faces turbulence.

“In the backdrop of an anticipated slowdown in global growth, reliance on public capex as a countercyclical policy will help in supporting overall growth,” said Vivek Kumar, an economist at QuantEco Research in Mumbai.
According to Debashish Biswas, partner at Deloitte India, the higher infrastructure capital expenditure proposed in the budget would enable economic growth as well as create more employment. “Huge capital expenditure in infrastructure will create a great multiplier effect for the economy,” he said.

Sitharaman said 100 critical transport infrastructure projects for the last- and first-mile connectivity for ports, coal, steel, fertiliser and foodgrain sectors had been identified and would be taken up on priority with an investment of `75,000 crore, including `15,000 crore from private sources.

These projects are part of the PM Gati Shakti - National Master Plan, launched by Prime Minister Narendra Modi in October to develop integrated infrastructure to reduce logistics costs.

The government has separately identified more than 9,000 projects under the National Infrastructure Pipeline that will also get a big leg-up with this spending. Road transport and highways minister Nitin Gadkari said this budget would equip India with newage infrastructure, help reduce imports and strengthen the country’s energy sector with a futuristic approach.

The transport sector remains the largest item for expenditure with an allocation of `5.17 lakh crore in the coming fiscal year, against `3.90 lakh crore in the current one.