Budget 2023: How CAPEX outlay of ₹10 lakh crore will create job opportunities?
4 min read 01 Feb 2023, 02:00 PM ISTOn February 1st, Nirmala Sitharaman, the Union Finance Minister, submitted the Budget 2023–24 to the Parliament. The Finance Minister declared during her Budget address that the government will boost the capital investment outlay by 33% to ₹10 lakh crore, which would be 3.3% of GDP.
PremiumOn February 1st, Nirmala Sitharaman, the Union Finance Minister, submitted the Budget 2023–24 to the Parliament. The Finance Minister declared during her Budget address that the government will boost the capital investment outlay by 33% to ₹10 lakh crore, which would be 3.3% of GDP. The Government has boosted the capital investment budget for a third year in a row. Economists claim that increasing capital expenditures is consistent with the government's goal of providing young people with numerous job options.
Prakhar Pandey, Founder and CEO, Moolaah said “The market was expecting a further commitment to public capital expenditure across infrastructure, clean energy, and agriculture from the Govt, and it has not disappointed. The total CAPEX outlay in the Union Budget has been enhanced by 33% from 7.5 Lakh Cr to 10.0 Lakh Cr which takes it to an all-time high of 3% of GDP. This will not only give a boost to the infrastructure sector but also be positive for employment and growth. Markets have taken this budget optimistically, with energy stocks and infrastructure stocks soaring gratefully accepting these moves. The lower fiscal deficit target was expected due to the softening of commodity prices globally and less spending on subsidies vis-à-vis the last 2 years due to pandemic relief. The government this time enjoys some fiscal headroom with a lower food and fertilizer subsidy bill after the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) was merged with the National Food Securities Act. Lower oil prices, cheaper fertilizers, softening food prices and softer commodity prices in the next fiscal as compared with this year will also provide the government ample space. With this capex outlay, the govt borrowing might increase but with a windfall gain in tax revenue and increasing GST revenue will help the govt. in managing the fiscal situation. The bond markets might see a small sharp rise in yields, going in line with global markets and India’s ongoing Fiscal situation, which is optimistic but not unachievable. For FII’s to participate yields will have to move up."
Ms. Madhavi Arora, Lead Economist - Emkay Global Financial Services on the Union Budget 2023-24 said “The budget has ensured, the fiscal impulse is maximized to improve potential growth, while signalling adherence to medium-term fiscal sustainability. This requires continued financial sector reforms, better resource allocation. Expenditure focus has been on rural, welfare, infrastructure, PLIs, and energy transition. Capex spend has picked up significantly to 3.3% of GDP and is almost double of Pre-Pandemic prints. This especially implies larger fiscal multiplier on employment and growth and will support crowding in of still-lacking private capex. The tax benefits have been tweaked to encourage individuals to move towards new tax regime, and to provide relief to middle class, while maximum marginal rate has also been reduced to 39% from 42.7% to give relief to the highest income strata. While the government is foregoing effective revenue of Rs350bn, this could have a consumption multiplier effect albeit at the margin, in the economy that’s seeing fading consumption growth."
Mr Azeem Ahmad, Principal Officer & Head PMS , LIC Mutual Fund said “Budget delivering on all front : Markets reaction at the end of budget speech was a big thumbs up with Equity markets up 1% and rates lower in fixed income market. On the frontline, the impossible balance of boosting capital expenditure by 33% but still managing the fiscal prudence FY24 Budget Gap 5.9% of GDP, Retains 6.4% FY23 and Gross borrowing at 15.43 vs exp of 15.77. Concerns of LTCG tweak was also not touched and also gave the sugar high for the equity markets.Going ahead, in a world which is slowing materially, India’s Capex frontloading likely to keep domestic centric Indian economy. Clear take away from this budget is focus on India (domestic centric focus). Consumption (on account of higher disposable income) and Capex sectors (capex up by 33%) both will see strong tail wind along with focus on railways, ports & airports and tourism. Fiscal prudence continues to prove a strong tailwind for the banking sector that is only moving towards its long-term valuation bands."
Mr. Balachander Sekhar, Co-Founder of RenewBuy said “The government rightly said that our digital infrastructure is unmatched. And, this digital power needs to be harnessed more so that, job creation, which is one of the primary focuses of the Government, is fulfilled. The increase of capital investment outlay by 33% to ₹10 lakh crore is a great step; this is the third year in a row that the Government has increased the capital investment outlay. Increasing the capex outlay is in line with government’s vision of creating ample job opportunities for the youth, providing strong impetus to growth, fiscal consolidation and strengthening of the macroeconomic stability. With tax rebate for people with income up to 7 lakhs, the middle class will now have more liquidity and they will look for investment tools. This is a great step, as personal finance will see a boost from this move. There will be increased investments in multiple personal finance segments, which also includes the insurance sector. The economy is thus expected to see more liquidity, which in turn will help in boosting the GDP."
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