Contrary to expectations, the much-anticipated budget of FY23 was bold and made a statement aiming at a structural foothold for long-term, high, single-digit growth rather than a financial presentation for just one year. The headline deficit is higher than expected for both FY22 at 6.9 per cent and FY23 at 6.4 per cent. However, the deficit being directed towards capital spending while pruning revenue spending is a positive. With a clear focus on low-hanging fruits such as roads, railways, defence, communication and increased allocation in the hands of states, the intent of a structural revival in growth is set. The Government is not shy of spending and allocating to develop the core infrastructure of the economy while simultaneously pruning revenue expenditure and subsidies. Revenue expenditure excluding interest is budgeted for a decline as most expenditure is projected to reduce or stay flat with the exception of allocation to states.The highlightsWhile the headline capex is ~24 per cent year on year (y-o-y), within the detail there is significantly higher allocation for roads (58 per cent) and communication and loans to states (4x). Defence and rail capex is also a healthy double digit. Under the larger umbrella of PM Gati Shakti, there is a layout for a multiyear capex pipeline. Capex/GDP grows to 2.9 per cent versus 2.6 per cent. Note that earlier in the years between FY2002 and 2005, average capex to GDP was 3.2 per cent, which led to strong GDP growth in the years ahead.PM Gati Shakti with its focus on seven core sectors is clearly positioned as the engine for growth. And this time around…Click here to read more...