Big Infra Push Will Have 'Multiplier' Impact On Growth: Experts
Presenting the last full-budget before the next year's General Elections, the finance minister stated that the investments in infrastructure and productive capacity have a large multiplier impact on growth and employment. "After the subdued period of the pandemic, private investments are growing again. The Budget takes the lead once again to ramp up the virtuous cycle of investment and job creation," she said. As a result, the FM has steeply increased the capital investment outlay to Rs 10 lakh crore for FY24 thereby increasing it by 33 per cent over current fiscal. "Capital investment is being increased steeply for the third year in a row by 33 per cent to Rs 10 lakh crore, which would be 3.3 per cent of GDP. This will be almost three times the outlay in 2019-20," the FM said.
The budget also enhances opportunities for private investment in infrastructure through the newly established Infrastructure Finance Secretariat. This, the FM said, will assist all stakeholders for more private investment in infrastructure, including railways, roads, urban infrastructure and power, which are predominantly dependent on public resources. Reacting to this, Jaijit Bhattacharya,
President, Centre for Digital Economy Policy Research and an expert on the infrastructure sector said: "Unprecedented budget allocation of INR 10 trillion for capex will go a long way in supporting demand in the economy, especially for the construction industry where we were witnessing softening of demand. The budget is also high in technology, both in usage as well as leveraging technology, especially digital technology and industry 4.0 technologies."
Applauding the FM on the budget announcements Harsh Vardhan Patodia, President, CREDAI National said an increased capital outlay for a third year in a row to INR 10 Lakh crores amounting to 3.3 per cent of the GDP, a hike of 66 per cent to over INR 79,000 crore for PM Awas Yojana and the INR 9000 crore Credit Guarantee Scheme for MSMEs, will have a positive multiplier effect on economic growth and help realize the PM’s vision for ‘Housing for All’.
Agrees Ranen Banerjee - Partner and Leader, Economic Advisory Services, PwC India. “The Union Budget ticks all the expected boxes viz. pump priming the economy with 33 per cent higher CapEx allocation; pushing consumption by encouraging taxpayers to adopt the new tax regime with lower taxes and consume the additional money in hand rather than using savings to lower the tax burden in the old regime; and sticking to the fiscal consolidation path with the fiscal deficit target being brought down to 5.9 per cent. The highest tax rate on personal income has also been brought down to address concerns on flight of HNIs,” said Banerjee.
Anand Rathi, Founder & Chairman, Anand Rathi Group said a 33 per cent increase in capital expenditure to INR 10 lakh crore rupees, the highest ever will go a long way in building roads, ports, and airports — crucial for making India a reliable investment destination. "Investment of Rs 2.4 lac crore in Railways is commendable. Boost to capex before the national polls is an indication Modi is focused on realizing his dream of making India a factory for the world," said Rathi.
On his part Ramnath Krishnan, Managing Director & Group CEO, ICRA termed the Budget as one that has provided a "much larger-than-expected boost to growth-inducing capital spending, while at the same time managing a fair degree of fiscal consolidation." Krishnan said: "The Budget proposals are likely to enhance business, rural and tax payer sentiment and consolidate India's growth prospects in a gloomy global setting. With the Government's borrowings similar to market expectations, the bond yields are likely to stabilise, which would also support the private sector capex plans."
Rumki Majumdar, Economist, Deloitte India, Deloitte India said such a huge jump in capex spending suggests that "the government means business and it is willing to do whatever it takes to improve efficiency and competitiveness at par with its competing peers". "This effort to build on the previous efforts will likely pull more investors and start a virtuous cycle of investments," Majumdar added.
