Presenting the Union Budget 2023-2024 today, Finance Minister Nirmala Sitharaman said she said the enhanced capex of Rs 10 lakh crore for infrastructure development is at 3.3 per cent of the GDP.
She said the newly established infrastructure finance secretariat will assist in attracting more private investment.
An expert committee will also be set up to make infrastructure classification and financing framework suitable for Amrit Kaal, she added.
What Was the Announcement?
At Rs 10 trillion, the allocation is higher than the 7.5 trillion rupees budgeted for in the previous year and the highest on record.
The year-on-year increase of 33% is only marginally lower than last year’s 35% jump. The ratio of capex-to-GDP, which rose to 2.7% in 2022/23, is estimated at 3.3% in the new financial year, Finance Minister Nirmala Sitharaman said.
The government will also continue a 1.3 trillion rupees long-term loan to states for longer term investments, the minister said.
Capex Explained
The money that the government spends on developing buildings, machinery, equipment, schools, and other infrastructure is known as capital expenditure. Additionally, it covers the costs made by the government for investments that will generate profits or dividends in the future, such as land acquisition costs.
Knowledge of capital expenditure
Spending on investments or development is referred to as capital spending, and these types of expenditures have long-term advantages. The following expenses are included in capital expenditures:
- Purchasing fixed and immovable assets
- enhancing a current asset
- restoring a current asset
- Payback of a loan
Why are capital investments crucial?
The long-term character of capital investment, which results in the formation of assets, enables the economy to generate income for many years by expanding or upgrading manufacturing facilities and increasing operational effectiveness. Additionally, it raises the ability of the economy to create more in the future, increases labour participation, and evaluates the economy.
Repaying a loan reduces liabilities, which makes it a capital expenditure along with the production of assets.
What distinguishes capital expenditure from revenue spending?
Revenue expenditures don’t increase assets or decrease liabilities for the government, in contrast to capital expenditures, which do both. Revenue expenditures include things like employee salaries, past-due debt interest payments, subsidies, pensions, etc. It has a pattern of repetition.
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