 "Govt capex rose 8.2% from July-Nov 2024, led by defence, railways, roads")
From July to November 2024, the Union government’s capex rose by 8.2 per cent, with defence, railways, and road transport accounting for 75 per cent of the total capital outlay, according to the Economic Survey 2024-25 released on Friday. Meanwhile, sectors such as power and food and public distribution witnessed notable year-on-year (Y-o-Y) growth.
The Economic Survey 2025, compiled under the guidance of the Chief Economic Advisor V Anantha Nageswaran, was tabled in Parliament by Finance Minister Nirmala Sitharaman on Friday. The release of the Economic Survey marks the beginning of the Budget 2025 session. Sitharaman will present the Union Budget for financial year 2025-26 (FY26) on Saturday.
Govt capex grows 38.8 per cent in past 5 years
Over the past five years, capital expenditure (capex) by the Union government on key infrastructure sectors has grown at an average rate of 38.8 per cent. This growth in capex demonstrated a sustained push for economic expansion with continued emphasis on infrastructure development and capital investment, the survey said.
The government’s capex for FY25 has seen a three-fold increase compared to FY20 levels, with roads, power, coal, and mines emerging as the top-performing sectors. This increase has primarily benefited critical transport infrastructure such as roads and railways.
Despite this momentum, the pace of infrastructure spending in Q1 FY25 was impacted by the Model Code of Conduct during the general elections, the Survey noted. As a result, a direct Y-o-Y comparison may not fully capture the progress made.
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Private investment and capacity utilisation
The Reserve Bank of India’s (RBI) Order Books, Inventory, and Capacity Utilisation Survey (OBICUS) indicates that the seasonally adjusted capacity utilisation (CU) in manufacturing reached 74.7 per cent in Q2 FY25, surpassing the long-term average of 73.8 per cent.
A private sector report analysing capital goods companies found that order books grew by 23.6 per cent in FY24, significantly outpacing the 4.5 per cent compound annual growth rate (CAGR) over the previous four years. Additionally, in the first half of FY25, orders expanded by 10.3 per cent compared to the end of FY24.
RBI’s private investment report highlights an increase in investment intentions, which rose to Rs 2.45 trillion for FY25 from Rs 1.6 trillion in FY24. The Survey notes that some of these investments will likely spill over into FY26, ensuring continued capital inflows.
While investment activity has recently slowed, the Survey describes this trend as temporary and anticipates a revival in the coming quarters.
State Spending: Growth in revenue expenditure, decline in capex
From April to November 2024, state governments’ revenue expenditure grew by 12 per cent Y-o-Y, driven by a 25.7 per cent increase in subsidies and a 10.4 per cent rise in committed liabilities. However, capital expenditure by states declined by 5.6 per cent over the same period.
Despite this overall decline, 11 states recorded higher capex, reflecting varied approaches to infrastructure spending. The Survey also noted significant differences in capital outlay as a percentage of revenue expenditure among states over the last five years.
National Monetisation Pipeline
The National Monetisation Pipeline (NMP), launched in August 2021, aims to unlock value from government-owned infrastructure assets by attracting private investments. Between FY22 and FY24, transactions worth Rs 3.86 trillion were completed, nearing the Rs 4.30 trillion target.
For FY25, the monetisation target stands at Rs 1.91 trillion, with roads, power, coal, and mines leading the charge, backed by market-driven reforms.
Railways expansion
Indian Railways, the fourth-largest rail network under a single management worldwide, saw further expansion in FY25. Between April and October 2024, 17 new pairs of Vande Bharat trains were introduced, and 228 coaches were produced, enhancing domestic rail connectivity.
Despite significant investments by the central and several state governments, the demand for infrastructure remains high, the Survey acknowledged. Further efforts will be required to bridge existing gaps and sustain long-term economic growth.
The Union Budget for 2025-26 will be presented by Finance Minister Nirmala Sitharaman on February 1.