Finance Minister Nirmala Sitharaman today said the 11% rate of increase in allocation towards capital expenditure in the budget, which looks moderate in comparison to the higher rates in the previous years, has to be seen in the context of the high base of the last fiscal and the green shoots that have begun to appear on the private sector investment front.

In the interim budget 2024-25, the government has allocated ₹11.11 lakh crore towards capital expenditure, up 11.11% from ₹10 lakh crore allocated in 2023-24. The hike in budgetary allocation in FY24 to capital expenditure over the previous financial year was to the tune of 33% over the previous fiscal.

Being asked about the moderation in rate, Sitharaman says, "There is eleven percent growth in capital expenditure. You have got used to about 30% and 23%, which were on a low base. And today 11% on a high base looks low. (Allocation of) ₹11 lakh crore is going into capital expenditure and you are seeing that the private sector is also coming with their investments."

"One has to have clear understanding that when the government wants to spend through capital expenditure, it could be for triggering the economy so that the private sector also comes in. At a time when the private sector is coming in, it is very natural to look at what base is 11% less. Growth it is, and also do look up whether or not the private sector is coming in," says Sitharaman.

Corporate sector meanwhile has welcomed the allocation to infra. "A significant highlight of the Interim Budget is the proposed 11.1% increase in capital expenditure to ₹11.11 lakh crore, constituting 3.4% of the GDP. This unwavering emphasis on infrastructure development is expected to propel the manufacturing sector, aligning with the vision of a Viksit, Atmanirbhar Bharat," says Abhyuday Jindal MD, Jindal Stainless.

"Announcement of large credit availability to the private sector will have a multiplying impact on the infrastructure development and overall economic development," says Shashi Kiran Shetty, founder and chairman, Allcargo Group.

It may be noted that the government has lowered the allocation to capital expenditure in the revised estimates for the current financial year to ₹9,50,246 crore against the budget estimate of ₹10 lakh crore for the fiscal.

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