Broad-based revival: Budget to push infra spending, says FM

Finance Minister Nirmala Sitharaman on Thursday said clear signs of broad-based revival of the economy was visible and reiterated that the upcoming budget would accelerate public investments in infrastructure.

“Even as we are going towards the making of the next budget after an extraordinary year with challenges… I would like to assure that public expenditure will continue and with better pace. Capital expenditure from the public sector undertakings particularly for infrastructure will be (accelerated),” Sitharaman said addressing a virtual session by Indian Chamber of Commerce (ICC).

Efforts to disinvest some of the big central public sector enterprises (CPSEs) are on track, she said, adding that India’s strong macro-economic fundamentals are attracting record foreign direct investment (FDI) even during the pandemic.

Sitharaman said: “We are seeing clear signs of revival across the board. But for it to sustain, I need to understand from you, the industry leaders as to what exactly you’re looking at (from the upcoming budget).”

After a record slide of 23.9% in the June quarter, the year-on-year contraction in real GDP narrowed to 7.5% in the second quarter of this fiscal. This represented a quarter-on-quarter surge in GDP growth of 23% and raised hopes that the worst was behind us.

After lagging behind in the first and second quarter of FY21 due to Covid-19 disruptions, the CPSEs’ capex has covered a lot of lost ground in the third quarter. The National Investment and Infrastructure Fund (NIIF) is taking steps to mobilise funds from abroad including from sovereign wealth funds. “(There is a) pipeline of more than 6,000 greenfield and brownfield projects…. several sovereign funds and pension funds are interested in coming into India,” she said.

The Centre, states and central PSEs among them will likely spend Rs 7.5 lakh crore on capital investments in the second half of this year, up 80% over such expenditure in the first half, according to an FE analysis, based on official projections and information gathered from different sources.

The expected surge in public capex in H2 would mean that a recovery in fixed investment rate that was visible in Q2 will gain further steam in the second half of the fiscal year, giving a strong support to gross capital formation.

On disinvestment, the minister said: “Even during the pandemic, our efforts to disinvest some of the big companies are going on fine.”

Recently, the government received expression of interest from potential buyers for its 52.98% stake in BPCL and 100% in Air India.