Monitor upcoming state budgets, which may have more capacity to increase spending

B2B companies that serve government projects stand to benefit the most from the government’s prioritization of capital spending in the recent budget. These companies should also track upcoming state budgets to note which states are likely to utilize the loans given out by the central government for their India subnational prioritization.


The Indian government released its US$ 524 billion budget for FY 2022–2023 (April 2022–March 2023) on February 1, marking a 13% increase over the previous budget. The government has prioritized economic growth over fiscal consolidation in 2022, resulting in an expected fiscal deficit of above 6% of GDP for a third consecutive year. In line with the trend in recent years, the government focused heavily on capital expenditure in this budget, increasing capital expenditure by 35% over the previous year.

Our View

The budget’s focus on capital expenditure is broadly positive, considering the significant multiplier effects of this spending on employment generation. Specifically, the government allotted the largest share of capital spending for roads and railways. Additionally, the government expects to spend 15% of its capital expenditure budget on loans to states for their own capital spending needs. This move will likely provide states with substantial capacity to increase spending, considering states’ critical role in the country’s overall capital spending. However, firms should note that capital expenditure prioritization in India has come at the expense of deprioritized spending on key social sectors, such as healthcare and education.

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