Budget 2025: Government may increase capital expenditure by 10-12 per cent in the budget
New Delhi| The Modi government may increase capital expenditure (capex) by 10-12 per cent in the upcoming Budget 2025-26 to focus on infrastructure development and build confidence among stakeholders. The continued increase in government capital spending is important for the economy after the election year, Jefferies said in a report.
The report said the 2025-26 budget will be closely monitored over double-digit increases in capital spending because, even taking into account the election results, the 2024-25 budget retained a 16 per cent annual increase in capital spending. Jefferies said in its report, 10-12 percent annual increase in capital expenditure in the budget to be presented on February 1, 2025 is also needed so that the capex to GDP ratio can be maintained. Also, it can be shown that the government is emphasizing on investment in infrastructure.
On the defense front, Jefferies said, the government could increase its spending at a compound rate of 7-8 percent annually from 2023-24 to 2029-30. This will be in line with the trends of the last decade. With existing policies, the domestic defense sector presents opportunities of $100-120 billion over the next 5-6 years. This means that the industry will grow at a compound growth rate of 13 per cent. If exports improve, growth could reach 15 per cent.
Government capital spending fell 15 per cent in the first seven months of FY2025 due to elections. To get a modest 5 per cent growth for the current fiscal year, a 32% increase in capital spending will be needed from November, 2024 to March, 2025.
