Union Budget 2023: Capital Expenditure by the Government: Government goes full throttle

• Capex spending remains the key area of focus with government capex allocation growth at 33% YoY in FY24BE to Rs 10 lakh crore led by sectors like railways, roads, defence, housing, water (Jal Jeevan) and metro projects. The capex to GDP is pegged at all-time high of 3.3%. The two sectors that stand out in terms of allocation is Railways (up 51%) and roads (up 25%)
• Given 50% of the total allocated capex is earmarked for Railways and Roads is clear indication for structurally brining down overall logistics costs in the economy which are currently at 14% of GDP and increase competiveness and scale of Indian exports
• In others category, segments like Housing (PM Awaas Yojana), Water (Jal Jeevan mission) has seen a growth in outlay to the tune of ~66% YoY, 17% YoY
• The allocation to defence capital outlay has moderated to 8.4% YoY growth. However, the focus on the defence segment is to indigenise the value chain of production thereby reducing import dependence (cushion CAD) while incubating home grown private companies, which itself can have a multiplier effect on the capex value chain
• 50 year Interest free loan to states to be spent on Capital expenditure within 2023-24; part of the loan is conditional on States increasing actual capital expenditure and parts of outlay will be linked to States undertaking several reforms

Strong Budgetary allocation to all major segments for capex (Rs crore)

Capex as % of GDP

The Budget has also focused on accelerating the green energy spectrum in order to reduce the carbon footprint. The major areas being Green Hydrogen and providing assistance of Rs 8,300 crore to the Ladakh Renewable project enabling investment of Rs 20,000 crore, which will have a multiplier effect across the capex value chain.

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