The Indian government has spent less than half the money it had budgeted for capital investments, so far

The Indian government has spent less than half the money it had budgeted for capital investments, so far
  • In last year’s budget Finance Minister Nirmala Sitharaman had announced ₹5.5 lakh crore ($74 billion) as capital investments.
  • As of November 2021, less than half of that has been spent
  • However, if it were to step up spending in the last three months to cover some of the slack, it could mean large orders for private companies like Larson & Toubro, Bharat Electronics, ABB and Siemens.
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A big part of the market rally that unfolded post the budget speech last year was the government’s commitment to spend big bucks on infrastructure. However, at the end of November 2021, less than half of the budgeted amount was spent.

As a report from HDFC Securities pointed out, the difference between the budgeted amount and the actual spending this year has been the highest in the last 4 years. The second wave of the pandemic, and the third one that’s underway right now, may have set back some of the spendings.
The Indian government has spent less than half the money it had budgeted for capital investments, so far
Flourish chart
Finance Minister Nirmala Sitharaman had said that the government would make capital investments worth ₹5.5 lakh crore by March 2022 on roads, metro rail network, renewable energy, and in building other such infrastructure.

Such spending results in orders for construction companies like Larson & Toubro, Dilip Buildcon, KNR Construction and IRB Infrastructure Developers, as well as equipment providers like Bharat Electronics, ABB and Honeywell. And, therefore, in better economic growth.

These are the shortfalls compared to the budget promise across different sectors:
The Indian government has spent less than half the money it had budgeted for capital investments, so far
A recent report by Crisil said that the central government expenditure on capital investments was up 31% compared to the last financial year, which was also the first year of the pandemic. The same number, when compared to 2019, is higher by 13%.


In September last year, the Finance Minister told ministries to increase the pace of spending to meet the targets. However, October and November continued to be lean months, according to a report by Elara Securities.

If the government decides to cover some of the slack in the last three months, it could result in some big orders flowing in. That could explain the recent rally in capital goods stocks.

“The lag in the spending for capital goods and infrastructure in FY22 was because of COVID-19 and related spending. This time the spending for these sectors started in October 2021. Even historically, the spending is high in the third and fourth quarter only as giving out tenders and finally giving the order to specific companies takes a lot of time,” said Kranthi Bathini, director of equity strategy at WealthMills Securities, told Business Insider.
Capital good companies % change in last five days
Greaves Cotton37%
Suzlon Energy23%
India Cements19%
Alok Industries18%
Varroc Engineering16%
Adani Green15%
Prism Johnson16%
RHI Magnesita India14%
Elgi Equipments15%
The market also hopes that the emphasis on capital investments will continue in the upcoming budget too. “Budget 2022 is most likely to focus on improving infrastructure. It might include a detailed list of public roads to railways assets, which the government plans to monetise during FY 2022-23. Reports also suggest that it might especially prioritise highways and expressways,” said a report by Bajaj Finserv.

“We expect major initiatives to be announced to stimulate capital expenditure both on the private and public side. This has been the thrust of the government since COVID hit the country’s growth. We expect schemes for outlay for development of infrastructure including major spending towards roads, irrigation, healthcare and smart cities,” Anshuman Khanna, Director at Value Prolific Consulting Services (ValPro) told Business Insider.

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