Budget 2024: Rajiv Anand Predicts Boost in Indian Private Capex

As India unveils its Budget 2024, it’s clear from the provisions that Corporate India is set to accelerate its private capital expenditure (capex). Rajiv Anand, the Deputy MD of Axis Bank, has hinted at an impending focus on such investments. With the fiscal deficit target pegged at 5.1% for the financial year 2025, the corporate sector seems primed for a capex push.

Fiscal Target and Private Capex Surge

Finance Minister Nirmala Sitharaman has delivered the interim budget for the year 2024, with a keen emphasis on infrastructure spending and improving the ease of doing business. A fiscal deficit of 5.8% of GDP for FY24, coming in lower than the anticipated 5.9%, demonstrates a robust fiscal strategy. The goal, according to Sitharaman, is to taper the fiscal deficit down to 5.1% in FY25, aiming even lower at 4.5% by FY26.

Capital Expenditure: The Growth Driver

According to Rajiv Anand, the enhanced focus on capital expenditure, which sees a greater rise compared to the general increase in expenditures, signals a positive outlook for private capex growth. The brewing momentum in private capex has been observed over the last three to four years, buoyed by strong corporate accruals which have largely funded these capital endeavors. As uncertainties, particularly surrounding the elections, subside, an uptick in private capex activities is highly anticipated.

Market and Liquidity Outlook

With the gross borrowing figures for FY25 set, Anand believes market players will approach them with ease. He does, however, acknowledge the current tight liquidity and the resultant increased cost of funds for banks. An easing of this tightness is forecasted, particularly with the U.S. expected to make its initial rate cut and factors such as index inclusion playing their part. Anand also proposes that certain monetary policy adjustments, possibly including variable rate reverse repo, open market operations, or even a cash reserve ratio cut, could be utilized to mitigate liquidity challenges.

Budget, Capex, Economy