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The centre is creating an ecosystem for domestic and foreign investment, underscored Finance Minister Nirmala Sitharaman, urging the private sector to reciprocate. The Minister added that banks and companies are in good health, suggesting the time is right for private investment.
The Economic Survey, a state of the economy report, has stressed that the Union government's efforts would need to be supplemented with "wholehearted acceptance" of the need for public-private partnerships in infrastructure across the country.
A capital expenditure, or capex, is used to set up long-term physical or fixed assets. In 2024-25, the central government kept the capital expenditure outlay at Rs 11.11 lakh crore. It was a 11.11 per cent raise in capex year-on-year.
Building infrastructure - physical, digital and social - has been a central focus area for the government in the last five years. This has had various dimensions - increase in public spending on infrastructure, creation of institutions to de-bottleneck approvals and execution and innovative modes of resource mobilisation.
"We are creating an ecosystem to increase the role of the public sector and to have policies like disinvestment. We are creating an ecosystem for domestic and foreign investment. We are helping to build an ecosystem to that effect," Ms Sitharaman told News Agency in an exclusive interview.
The substantial increase in capex is central to the government's efforts to enhance growth potential and job creation, crowd in private investments and provide a cushion against global headwinds.
The government on Saturday announced the biggest tax relief in at least a decade to boost consumer demand to revive growth in the world's fifth-largest economy, giving a huge relief to millions of households grappling with high inflation.
India's economic growth is expected to slow to a four-year low this fiscal year due to weak demand, particularly in urban areas where the cost of living has soared. The new structure will increase disposable incomes, boosting household consumption, savings and investment, Nirmala Sitharaman said in her Budget speech.
"Corporate tax rate was reduced in 2019 due to twin balance sheet problem. Banks and companies are in good health now. They are waiting for passive investment. If consumption increases and there is a possibility of greater investment, that can also be a good trigger," the Minister added.
The Union Budget 2025's focus on supporting lower and middle-income households could help revive private investment in the economy, according to a report by HDFC Bank.
The report highlighted that consumer demand has remained weak, affecting corporate sentiment, but the latest budget measures may provide the necessary push to stimulate economic growth.
It said, "A push for the lower and middle-income households - where the propensity to consume is high -- could provide the much-needed sentiment boost to get the private investment cycle rolling."
The report noted that capital expenditure generally has a stronger impact on economic growth compared to tax cuts. However, weak and fragmented consumer demand has been a key factor holding back private sector investments.
Since the COVID-19 pandemic, the government has raised capital expenditure sharply in the hope of fashioning an investment-led recovery. Consumption in the Indian economy has been under stress in the last few quarters as shoppers tightened their purse strings amid stubborn inflation and modest wage growth.
"At the margin, there is a tilt towards supporting consumption through tax cuts for middle class households, relative to the public capex push seen over the last four years," said Sonal Varma, Nomura chief economist, India and Asia ex-Japan.
Badal Yagnik, CEO of Colliers India, said the rationalization of taxes and enhancement of exemption limits can boost disposable income, spurring consumption levels and real estate investments, particularly in residential real estate and alternate financial instruments such as REITs.
The government also made room for homeowners to claim two self-occupied properties as tax-free, as compared to only one earlier, a move likely benefiting residential real estate investment.