Budget 2024: High allocation expected for railways despite capex pressure

A report, citing government officials, said that the gross budgetary support for railways is set to increase to Rs 2.6 trillion

The allocation to the railways sector in the upcoming budget is expected to remain high despite pressures to bring down the pace of budgetary capital expenditure on infrastructure, according to government officials cited by The Financial Express.

In the Interim Budget for 2024-25, Finance Minister Nirmala Sitharaman allocated Rs 2,52,200 crore to the railways as gross budgetary support (GBS), along with an additional Rs 10,000 crore from extra-budgetary resources (EBR). A senior official in the Ministry of Railways informed The Financial Express that GBS is anticipated to stay at least at this level and could potentially increase to Rs 2.6 trillion.

Over the past few years, the share of GBS in capital expenditure financing has increased rapidly, while EBR has declined, the business-daily said. EBR consists of borrowing from sources like the Indian Railway Finance Corporation (IRFC), institutional financing, foreign direct investment (FDI), and public-private partnerships. 

The allocation towards EBR allows the government to delay investments if necessary, but increased budgetary support indicates a commitment to immediate spending and capital expenditure.

Meanwhile, industry insiders highlighted that with road and highway construction spending nearing the end of its cycle — allocated Rs 2.78 trillion in the Interim Budget — the railways are poised to become the next significant investment focus. 

Railway spending is set to continue robustly to reduce logistics costs relative to GDP, with substantial investments in all areas of the railway infrastructure, including wagons and coaches, signalling, new lines, gauge conversion, and high-speed trains.

The report noted an increase in railway allocations this year, with the government prioritising safety and passenger comfort. The report noted that in response to the recent train accident in West Bengal, the installation of the Kavach automatic train protection system would be expedited.

The infrastructure push will persist, with the railways remaining a crucial investment area over the next decade, the report cited the official as saying. Initial concerns about resource shifts in the full-year budget towards private consumption have eased, providing ample space for continued heavy capital expenditure outlay in sectors like roads and railways.

With the Reserve Bank of India (RBI) set to pay a record-breaking dividend of Rs 2.11 trillion to the government, there is room to balance spending between boosting consumption and maintaining high capital expenditure plans, according to the news report.