Budget 2021: Capex boost to drive steel demand

Sumit Maitra

A Union Budget like ‘never before’ has put revival of economic growth as the central theme which is intended to be achieved, as proposed by Finance Minister Nirmala Sitharaman, through generous capital expenditure across sectors including infrastructure to pull the economy out of the post pandemic slowdown.

Rs Capex allotment of Rs 1,07,100 crore for Railways, 2.87 lakh crore outlay for Jal Jeevan Mission, construction of roads under Bharatmala Pariyojana project, Swachh Bharat Mission 2.0, Scheme for Mega Textile Parks are all expected to increased demand for steel in the country.

Presenting the Union Budget for FY22 in Parliament, Union Minister for Finance & Corporate Affairs, Nirmala Sitharaman unveiled a sharp 34.5 percent increase in allocation for capital expenditure with Budgetary Estimates of Rs 5.54 lakh crore, up from Rs 4.12 lakh crore for FY21.

With efforts to prop up the economy already underway, capital expenditure for the current year is expected to touch Rs 4.39 lakh crore, more than what was budgeted for.

“The thrust of the budget is on infrastructure creation. The creation of an institutional structure for the financing of infrastructure can play a catalytic role for meeting the infrastructure gaps of the country,” Care Ratings said in an analysis of the Budget proposals.

And looking beyond the coming year, the government has committed nearly Rs 1.97 lakh crores in the next 5 years to help bring scale and size in key sectors, create and nurture global champions and provide jobs.

Capex for defence services, railway, and road, transpor t and highways has been budgeted at more than Rs 1 trillion.

Higher capex for railways, road transport and highways, transfer to states, and housing and urban affairs to crowd in private investments and will create a multiplier effect in the economy. India Ratings

“More than 95 percent of the capex in FY21 (revised estimates and FY22 (budget estimates) is concentrated in 12 ministries and departments. The combined capex of four major ministries/department is budgeted to grow 12.6 percent in FY22,” India Ratings said.

Focus on on-ground implementation

Focusing on the implementation front, a sum of about Rs 44,000 crore has been kept aside in the Budget of Department of Economic Affairs and will be given to projects or programmes or departments that show onground good progress and are in real need of funds to complete infrastructure projects.

Also, a sum of Rs 2 lakh crore will be provided to states and autonomous bodies to help them with their capex plans.

The Union government would be working out specific mechanisms to prod the states to spend more of their budget on infrastructure creation, Sitharaman said.