RBI windfall dividend could help boost Govt capex by 25%: CII chief

Industry body pegs FY25 GDP growth at 8%
Last Updated : 13 June 2024, 21:11 IST

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 New Delhi: The Union government may increase its capital expenditure outlay by 25 per cent this financial year (FY25) compared to FY24, on back of the windfall dividend of Rs 2.1 lakh crore from the Reserve Bank of India (RBI), Sanjiv Puri, Chairman & Managing Director of ITC ltd and president of industry lobby Confederation of Indian Industries (CII), said on Thursday.

This, coupled with an expected pick-up in private investment, would help in achieving a robust 8 per cent GDP growth for the second consecutive year, Puri said.

In the interim budget presented in February, Finance Minister Nirmala Sitharaman pegged the government capex for FY25 at Rs 11.11 lakh crore, which is 16.8% more than the revised estimate of FY24. A 25% year-on-year increase would take the capex target to Rs 11.87 lakh crore.

Addressing his first press conference after taking charge as CII President, Puri said a part of the RBI’s dividend, the highest ever payout to the Centre, should be used to boost investment on infrastructure.

The hefty dividend and buoyancy in tax collections give room for boosting investments and lowering the fiscal deficit target in the full budget which is likely to be presented in the third week of July.

In the interim budget, the finance minister proposed to lower the fiscal deficit from an estimated 5.8 per cent of GDP in 2023-24 to 5.1 per cent in 2024-25.

However, some analysts argue that a fractured mandate in the recently held Lok Sabha election and the upcoming assembly elections would force the government to boost spending on social welfare schemes.

On private sector investments, the CII president said the improvement in private capex is expected in the first half of the ongoing financial year. Puri pointed out that private sector gross fixed capital formation as percentage of GDP in FY23 was higher than the pre-pandemic level, at 23.8 per cent compared with 22.4 per cent in FY19

In recent years, private sector investments have been led by infra-linked sectors such as cement & steel; PLI sectors like electronics manufacturing, food processing, telecom and pharmaceuticals, logistics, renewable energy, automobiles, electric vehicles and semiconductors.

CII has pegged GDP growth for the current financial year at 8%, which is sharply higher than the RBI’s estimate of 7.2 per cent. The GDP growth stood at 8.2 per cent in 2023-24, as per the latest official data. “The growth rate is poised to touch 8% during the current year marking the fourth consecutive year of above 7 per cent growth,” said Puri.

“The growth estimate hinges critically on addressing the unfinished reform agenda on priority, in addition to improvement in world trade prospects aiding our exports, twin engines of investment and consumption doing well and expectations of a normal monsoon among other factors,” he added.

Published 13 June 2024, 21:11 IST

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