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Business News/ Economy / Govt's emphasis on capex to sustain high growth highlight of interim budget: FM Sitharaman
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Govt's emphasis on capex to sustain high growth highlight of interim budget: FM Sitharaman

Speaking in the Rajya Sabha, Sitharaman said the government will ensure that fiscal deficit targets are achieved

Union finance minister Nirmala Sitharaman. (Photo: ANI)Premium
Union finance minister Nirmala Sitharaman. (Photo: ANI)

NEW DELHI : The government's emphasis on capital expenditure to sustain a high economic growth rate has been the highlight of the interim budget, finance minister Nirmala Sitharaman said on Thursday.

Speaking in the Rajya Sabha, Sitharaman said the government will ensure that fiscal deficit targets are achieved, without hurting any infrastructure projects.

The finance minister was responding to general discussions on the interim budget, the finance bill, and the interim budget of the Union Territory of Jammu and Kashmir in the upper house of parliament.

"The route we are taking is to spend on public infrastructure creation and asset creation because that, as opposed to spending on revenue expenditure, gives you better returns on investments made," she added.

In the interim budget presented last week, the Centre raised the total allocation for infrastructure projects to 11.11 trillion for FY25, up from 9.50 trillion in the revised estimates for FY24.

The government also aims to lower fiscal deficit to 5.1% of GDP in FY25, from 5.8% in FY24, and 4.5% or below by FY26.

The Reserve Bank of India (RBI) expects India's GDP to grow at 7% during FY24, making it the fastest-growing major economy in the world.

As things stand, capital spending by the government has been on the rise since the pandemic, even as private investment remained tepid.

Although private investment gathered some momentum in the current fiscal year, economists have recommended doubling down on government capital spending to help steer the economy through any turbulence, including an anticipated global slowdown in 2024.

Stating that capital expenditure has a multiplier effect on the economy, Sitharaman said that while every Rupee spent on revenue expenditure gives a return of 0.98, a Rupee spent on capital expenditure gives a return of 1.46 in the short term, and more in the medium and longer term.

"Spending money on public infrastructure gives us greater returns and creates jobs. Local services also benefit. The ripple in the ecosystem can also have greater benefits for the economy," she said.

"With the capital expenditure being in focus, in the last three to four years, we have made sure that our debt management is done in such a way that we honour the glide path for the fiscal deficit that we had given in 2021," she added.

Meanwhile, the finance minister asserted that funds for no major flagship programme have been curtailed, rejecting the opposition's criticism.

Unemployment rate in rural areas has decreased from 5.3% in 2017-18 to 2.4% in 2022-23, while women's labour force participation increased from 23.3% in 207-18 to 37% in 2022-23, she added.

Responding to references made on India's poor positioning in the Global Hunger Index, Sitharaman said the index didn't follow a balanced approach to measure hunger.

India ranked 111 out of 125 countries in the Global Hunger Index 2023.

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Published: 08 Feb 2024, 10:02 PM IST
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