Union Budget 2022:23: Capital Expenditure Of Rs 7.50 Lakh Crores To Boost Economy

The Budget has largely been fiscal expansionary and this was expected, given that the government needs to boost spending.

The union budget for 2022-23 has stepped up the capital expenditure sharply by 35.4 per cent to Rs 7.50 lakh crore.

In per centage terms the amount is huge and most of it would go for infrastructure development and social spending on schemes. When the government boosts expenditure it tends to provide a fillip to the economy as private investment has not been too encouraging.

Huge capital expenditure tends to have a domino effect as the contracts also tend to boost revenues of private players and finally increase tax flows to government coffers and also generate employment.

However, it also pushes up the fiscal deficit of the government. The fiscal deficit pegged at 6.4%, of GDP for 2022-23 is not a smaller number.

Sovereign rating agencies keenly watch this fiscal deficit number when providing ratings. A high capital expenditure results in a higher fiscal deficit, which is not good from a ratings perspective. However, given that the government had to provide a fillip to the economy it had to boost spending and hence the higher capital expenditure.