Centre’s Capex Target: Building Momentum Amid Challenges
Introduction
The government’s capital expenditure (capex) plans for FY2025 aim to sustain economic growth through infrastructure development and innovation. With an allocation of ₹11.11 trillion, this year’s target reflects continuity in the Centre’s strategy, though utilization is projected at 95% of the target, similar to FY2024, according to Ajay Seth, Secretary, Department of Economic Affairs.
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Capex Utilization Trends
In FY2024, ₹9.49 trillion of the revised ₹9.50 trillion target was spent, achieving 95% of the allocation. For FY2025, the government expects to utilize ₹10.55 trillion, maintaining the same efficiency. However, early spending has slowed, with Q1 FY2025 capex contracting by 35% year-on-year to ₹1.8 trillion, largely due to the general elections. State capex also declined by 21% during this period.
Resilient Economic Indicators
Despite a sluggish start to capex, key economic indicators remain strong. Private Final Consumption Expenditure (PFCE) and Gross Fixed Capital Formation (GFCF) grew by 7.4% and 7.5% in Q1 FY2025. These figures underscore robust consumer spending and investment activity, critical for sustaining growth momentum.
Focus on Innovation
The ₹1 trillion Anusandhan National Research Fund, expected to be operational by February, is a significant initiative to boost private-sector R&D. This fund aims to bridge the gap between research and industry, promoting innovation and reducing dependence on foreign technology. Defence Secretary Rajesh Kumar Singh emphasized the need for indigenous manufacturing to strengthen India’s industrial capabilities.
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Growth Outlook
The government remains confident in achieving the Economic Survey’s 6.5%-7% GDP growth projection for FY2025, supported by the Reserve Bank of India’s estimate of 7.2%. Ajay Seth noted no downside risks, signaling optimism for economic stability.
Conclusion
The Centre’s capex strategy reflects a balance of ambition and realism. While election-linked delays pose challenges, initiatives like the Anusandhan Fund and steady infrastructure investments promise long-term benefits. Delivering on these plans will be key to sustaining India’s economic growth trajectory.
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