The increased public spending in infrastructure
is part of the government’s efforts to boost economic growth amid a global slowdown and in the aftermath of demonetisation.
Including funds, the railways will raise from the markets, infrastructure
spending by central government departments and state-owned companies has been pegged at over Rs 3.9 lakh crore in 2017-18.
“It is the most a government could do while following the fiscal road map. One-third of the capital spending is for defence, that bit will most likely go to foreign vendors rather than build infrastructure
here,” said Madan Sabnavis, chief economist with CARE Ratings.
Private investment in infrastructure had dried up because of weak corporate performance and mounting bad debts, he added, and infrastructure spending would be 2-2.5 per cent of the GDP for a few years.
“If the Centre was looking to spend more, you would have seen a fiscal deficit target of 3.5 per cent instead of 3.2 per cent,” Sabnavis said. The budgeted fiscal deficit for 2017-18 is 3.2 per cent of the GDP.
Jaitley had first announced the Centre’s commitment to boost public spending in infrastructure in the 2015-16 Budget.
The Centre’s capital expenditure crossed Rs 2 lakh crore for the first time that year and was the steepest year-on-year jump, almost 29 per cent higher than in 2014-15. The push continued in 2016-17, with RE of capital expenditure 11 per cent higher than the actual spending of the previous year.
“It is not that the private sector is refusing to invest. It cannot invest. As far as the government is concerned, there is not much more it could have done. But it has not been able to get private investment going,” said Manish Aggarwal, head of corporate infrastructure and financing at KPMG in India.