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Centre on tap breaks on capex growth

January 23, 2023

Centre on tap breaks on capex growth
The Indian government is set to tap the brakes on a torrid pace of capital investment growth in the coming fiscal year as a slowing economy limits spending power by weakening tax revenue, according to a Reuters poll of economists.

Food and fertiliser subsidies that help two-thirds of India’s 1.4 billion people will also be scaled back, according to the survey.

Prime Minister Narendra Modi’s government has more than doubled capital spending since fiscal 2019/20 in a bid to make India a more attractive destination for global manufacturing. But private investment has lagged New Delhi’s lead for about a decade.

Now, that robust pace of government investment is set to slow to barely half its previous rate in the fiscal year to March 2024, according to the Jan. 13-20 Reuters poll of 39 economists.

Capex is set to increase in fiscal 2023/24 by about 17% to 8.85 trillion Indian rupees ($109 billion), from an estimated 7.50 trillion rupees in the current fiscal year, itself up roughly 35% on a year before.

“The government has shown an express motivation to ramp up capex, and the expected absence of a robust recovery in private capex will make public capex particularly important in FY24,” noted Sonal Varma, chief economist for India and Asia ex-Japan at Nomura.

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