Govt must target Rs11L cr capex, give relief to lower bracket taxpayers: ICRA

The government should target a capital spending of Rs 11 lakh crore in the Budget for the next fiscal while giving inflation-adjusted relief on personal income tax to boost consumer spending, rating agency ICRA said on Wednesday.

ICRA Chief Economist Aditi Nayar said last year’s record budgeted capital expenditure of Rs 11.11 lakh crore is likely to fall short by about Rs 1.4 lakh crore and the next year’s target should be fixed at the last year’s level with a focus on keeping borrowing within reasonable limits.

Further, Nayar said capex numbers are trailing the run rate required to get to the Budget target in the current fiscal.

Between April and November, capex spending stood at Rs 5.13 lakh crore, 46 per cent of the Budget estimates of Rs 11.11 lakh crore.

“We are looking at a large shortfall in the current fiscal. For next year, we are hoping that we will get fiscal space to prioritise capex... For FY26, based on the revenue numbers...a fiscal deficit of 4.5 per cent of GDP will be quite reasonably achieved. That would allow us Rs 11 trillion of capex, a growth of 11-12 per cent over the number that we think is feasible for FY25,” Nayar told PTI in an interview.

She said putting in a larger capex number may not be “prudent” as a larger borrowing and fiscal deficit would push up yields.

She said the Budget for 2025-26 should put a “realistic capex number” upfront and if, during the course of the year, it looks like it will be over-achieved, then the government could take the supplementary demands for grants route to up the target.

To shield the economy from the impact of Covid, the government has been spending heavily on infrastructure and building capital assets. It earmarked Rs 4.39 lakh crore capex in 2020-21.