Budget 2024-25 projected to boost infra and logistics industries

20 Jun 2024 CW Team

The budget for FY25 is anticipated to continue its emphasis on capital expenditure, aligning with trends from previous years. The industry is calling for a 25% increase in capex allocation compared to the revised estimates for FY24. However, experts warn that there might be limited capacity to spend on projects within the remaining eight months of the fiscal year after the budget is tabled in the second half of July.

Madan Sabnavis, Chief Economist, Bank of Baroda, remarked, "The ability to spend on so many projects in eight months is limited. While increased capex is desirable, actual capacity to implement these projects is a concern."

The Confederation of Indian Industry (CII) has recommended that this year's capex should focus primarily on rural infrastructure, including irrigation, warehousing, and cold chain facilities.

In her interim budget, Finance Minister Nirmala Sitharaman increased the Centre?s capital expenditure target by 16.9% for FY25, bringing it to Rs 11.1 trillion over the revised estimates for FY24. Data from the Comptroller and Auditor General of India (CAG) showed that 25 states achieved 84% of their budgeted capital expenditure for FY24, with Uttar Pradesh, Telangana, Bihar, and Sikkim meeting or exceeding their targets.

The budget for FY25 is also expected to outline the conditions linked to Rs 750 billion in loans to be provided to states.

S&P Global Ratings recently upgraded its outlook on India, citing robust economic growth and significant improvement in the quality of government spending. While private sector investment is showing positive signs, experts emphasise the need for the government to continue increasing capital expenditure to further stimulate private sector investment. India's GDP data indicates that private non-financial gross fixed capital formation has grown at a compounded annual growth rate of 4.6% in the January-March 2024 period. (Source: Business Standard)

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