iifl-logo

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

sidebar image

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

27 Jan 2023 , 10:45 AM

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 Capital Services 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 Capital Services expect minimal populism and deficit of 5.8%.

Methodology

Analysts at IIFL Capital Services 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 Capital Services 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 Capital Services have noticed major capex emphasis, and the current NDA is both fiscally conservative and capex-oriented, relative to previous governments. Analysts at IIFL Capital Services 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 Capital Services 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.

 

Related Tags

  • Budget
  • Budget expectations
sidebar mobile

BLOGS AND PERSONAL FINANCE

Read More

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

Knowledge Center
Logo

Logo IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000

Logo IIFL Capital Services Support WhatsApp Number
+91 9892691696

Download The App Now

appapp
Loading...

Follow us on

facebooktwitterrssyoutubeinstagramlinkedintelegram

2025, IIFL Capital Services Ltd. All Rights Reserved

ATTENTION INVESTORS

RISK DISCLOSURE ON DERIVATIVES

Copyright © IIFL Capital Services Limited (Formerly known as IIFL Securities Ltd). All rights Reserved.

IIFL Capital Services Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
ARN NO : 47791 (AMFI Registered Mutual Fund Distributor)

ISO certification icon
We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.