Capex to be revved up, revex to be capped in the Budget: IIFL Securities

  • 27 Jan, 2023 |
  • 10:45 AM
  • Analysts at IIFL Securities have analyzed the expenditure trends in the last four pre-election-year (PEY) Budgets to see if governments tend to focus on populism/rural/growth, etc.

Their conclusions are: 

  • While revex (revenue expenditure) seems to carry more bang for the electoral buck, governments do not always step it up relative to capex in PEY Budgets
  • Classifying all expenditures into growth or populist, analysts at IIFL Securities observe that in three out of four PEY Budgets, growth expenditure was accelerated by much more than populist schemes
  • Only in one of these budgets (FY14) was rural expenditure sharply accelerated, as was the case with Ministry of Roads also. 

Analysts at IIFL Securities expect minimal populism and deficit of 5.8%.


Analysts at IIFL Securities have compared the YoY BE (budget estimate) over RE (revised estimate) in PEY Budgets, with the 3-year CAGR of RE over Actuals, line item-wise. Since YoY or 3-year CAGR can be influenced by inflation, analysts at IIFL Securities have compared acceleration between segments — hence: (i) capex/revex (ii) populism/growth (iii) rural/others.

Governments do not always step up revex, though it pays

In FY04 and FY14 Budgets, the respective governments raised capex growth instead of revex growth relatively, and lost. On the other hand, revex was emphasized more in FY09 (significantly) and in FY19 (marginally), and incumbents won. However, in two out of three PEY budgets, analysts at IIFL Securities have noticed major capex emphasis, and the current NDA is both fiscally conservative and capex-oriented, relative to previous governments. Analysts at IIFL Securities expect that to show up now too.

PEY Budgets not really populist – expect fiscal deficit of 5.8%

Classifying all capex as growth and all revex as either populist (scheme-related) or others (salaries, pensions, etc.), analysts at IIFL Securities notice that large increases over trend were seen for growth expenditure. They expect that a reduction in subsidies will enable fiscal deficit budgeted to come in at 5.8% for FY24, and continuation of support for Manufacturing, Green Energy, EVs, etc.; and of course, expansion of allocation for Infra.


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