We are in the midst of capex 'mahotsav'

Strengthening macroeconomic stability has been a cornerstone of the Modi government’s economic policymaking. And, this has been a key factor in catapulting India’s economic fortunes. Budget 2023-24, too, passes the macroeconomic ‘pariksha’ with flying colours.

The finance minister has once again done a stellar job of supporting growth whilst maintaining fiscal pragmatism. That too, at a time when most advanced economies are wrestling with recessionary conditions.

The government’s move to boost capital spending by more than a third, to Rs 10 trillion will ensure the growth juggernaut remains unstoppable. At 3.3 per cent of the gross domestic product, the capex outlay is almost 3 times the 2019 levels. 

We are truly in the midst of a ‘capex mahotsav’. The sustained thrust on government capex lays the foundation for future growth and employment. In the near term, it should crowd in private investment.

The government has identified 100 critical infrastructure projects for last and first mile connectivity at an investment of Rs 75,000 crore. In addition, there is a plan to add 50 airports, heliports, and aerodromes.

The government has announced this increased expenditure program without compromising on the credibility of the fiscal deficit. The target of 5.9 per cent for the 2023-24 financial year (FY24) appears realistic. The finance minister’s commitment of pulling back deficit targets to the long-term desired path is also encouraging.

The government has wisely renewed its focus on keeping a tight rein on its finances and sticking to the path of fiscal consolidation. This is probably the best course of action in the current troubled global environment.

Let us not forget the situation in much of the developed and developing world today. Currencies in some countries have collapsed due to sky-high inflation, and jittery bond markets have reacted by sending interest rates higher. Debt has piled up so high, even in some developed countries, that higher rates are likely to make interest payments a massive burden.

Much of this has been caused by high government spending, leading to inflation. Fortunately, in India, the government was wise and prudent in spending during the Covid-19 years and did not give into demands for large fiscal giveaways.

India, too, had to wrestle with high inflation but those pressures have been contained to a large extent on the back of deft and tactful handling by the Reserve Bank of India.

This prudent course has enabled the government in this Budget to wisely propose meaningful spending measures and tax sops —infrastructure, railways, and rural credit being prime examples. 

The government’s track record on infrastructure creation has so far been excellent with a number of roads, highways, expressways and urban metro lines being built at record speed. It is possible to imagine that large parts of the country would have overcome the infrastructure deficit few years later, with citizens enjoying a much better quality of life.

Meaningful and measured tax sops have also been granted in the Budget. The government has kept in mind the middle class and the tax-paying citizenry whose vast economic contribution, especially during and after the pandemic, helped buoy economic growth. The sops announced — including reduction in slabs and increase in exemption limit — will help hard-pressed households weather the inflationary storm better. It will also boost consumption, a key pillar of our economic growth.

Overall, Budget 2023-24 is bold and imaginative in its scope and yet realistic in its assumptions. It will protect growth in the near term and more importantly, lay the foundation for a glorious Amrit Kaal. 

The writer is Chairman, Aditya Birla Group