Finance Minister Nirmala Sitharaman said that capital expenditure or CapEx is "one assured way through which consumption can be increased. Ms Sitharaman, while speaking to NDTV's Editor-in-Chief Sanjay Pugalia, said that she believes in Prime Minister Narendra Modi's emphasis on capital expenditure.
"I honestly believe in the PM's emphasis on capital expenditure, public funding of capital asset building. In the last four years, we have announced big amounts and also focussed on implementation and execution. It definitely has helped the rural economy. And consumption is derived from that," she said.
The spending plan was unchanged from the interim budget presented in February before the Lok Sabha elections. "This would be 3.4 per cent of our GDP (gross domestic product)," Ms Sitharaman said.
The Finance Minister announced, while presenting her seventh straight Budget on Tuesday that the government will spend a record Rs 11 lakh crore on infrastructure in the financial year ending March 2025 to support growth and create more jobs.
"We announced 11 lakh crore (CapEx) and we are going to take it forward. So Capex is one assured way through which consumption can be increased and it has increased which is why we are growing at this rate," she told NDTV.
The economy expanded at a faster-than-expected pace of 7.8 per cent in the March quarter. It grew 8.2 par cent in the past fiscal year and the government sees growth of 6.5 per cent to 7 per cent this fiscal year, a report showed on Monday.
The government has doubled spending on infrastructure over the past three years as a way to boost the economy. As a percentage of GDP, longer-term capital expenditure has risen to 3.4 per cent in the current year from 1.7 per cent in 2019-20.
The states have been assigned Rs 1.5 lakh crore in long-term loans to fund expenditure on long-term infrastructure projects. Some will be linked to reform milestones in areas such as land and labour, which Ms Sitharaman said the government intended to push in its third term.