Budget 2022: Capex to fire on all cylinders to support the economic recovery post-COVID

 

The Union Budget 2022-23 has allocated one of the highest capital expenditures of Rs 7.50 lakh crore in 2022-23 , which is 35 per cent higher than the budgeted figures of 2021-22.

Despite high base of Rs 5.54 lakh crore in 2021-22 , the government has decided to continue on the path of high capital expenditure to fuel growth in the economy. 

This capex is expected to flow into railways, roads, urban transport, power, telecom, textiles, and affordable housing. The Union Budget 2022-23 has already prioritised money for Atmanirbhar Bharat, which is expected to provide 60 lakh new jobs in the next 5 years.

There is also a Gati Sakti Master plan to fuel growth in roads, airports, etc. This year's Budget has proposed expanding the National Highway network by 25,000 kms in 2022-23. There is also a plan for 400 new generation Vande Bharat trains during the next 3 years.

The government has been pushing high capital expenditure post the pandemic as the private investments are not keeping pace because of low capitalisation in the economy. The economy was actually slowing down much before the pandemic. Today, corporate balance sheets are much better as they have deleveraged big time. The banking system is also flush with liquidity. If the demand or growth comes back, the corporate and the banks are ready to participate in the growth story. 

According to the finance minister, high capital expenditure is required to sustain the high level of growth. 

The advance estimates suggest that the Indian economy is expected to witness a real GDP expansion of 9.2 per cent in 2021-22 after contracting in 2020-21.

The GDP forecast for 2022-23 has been pegged at around 8-8.5 per cent.

The Economic Survey 2022, which was released on Monday, had also stated that the targeted focus on capital expenditure, with its resulting multiplier effects, will be vital in sustaining economic growth.

Commenting upon the Budget, Suman Chowdhury, Chief Analytical Officer at the ratings agency Acuite Ratings & Research stated that the increase in capex spending, as highlighted today, was a welcome move by the government.

"Acuité had highlighted earlier that the government will have a larger focus on public capital expenditure in FY23. The outlay for capex has been significantly enhanced by 35% from Rs 5.5 lakh Cr to Rs 7.5 lakh Cr, which is more than double of the levels in FY20. This will continue to boost the construction sector and generate jobs in the infrastructure sector," he said.