Budget 2024 Expectations: Indian Railways is expected to receive a boost in capital expenditure in the upcoming interim budget on February 1. Analysts have said that Finance Minister Nirmala Sitharaman may allocate more funds to facilitate a significant transformation of the national transportation system, including the introduction of modern and high-speed trains as well as enhanced safety measures.
The Interim Budget 2024-25 will likely allocate Rs 2.8-3 lakh crore for the Railways to keep its capex momentum intact, compared with Rs 2.4 lakh crore provided in the 2023-24 (Budget Estimate).
In 2023-24, the budgetary support was around Rs 1.6 lakh crore, while the capital allocation was around Rs 2.45 lakh crore. The gross budgetary support last year went up to Rs 2.4 lakh crore in 2023-24, while the total capital allocation was Rs 2.6 lakh crore.
Analysts in Prabhudas Lilladher, Icra and Elara Capital have said that the upcoming Budget can see a decent jump in capex, considering the greater emphasis on railways modernisation.
“We expect adequate allocations towards the infrastructure sectors such as roads, highways and railways in 2024-25. The defence outlay — on R&D and acquisitions — may be enhanced further, amid the government’s focus on encouraging the development and production of emerging technologies,” Icra said.
The rating agency said they expected interest-free capex loans to states would continue in 2024-2025. The sum was Rs 1.3 lakh crore in the last budget.
Icra said it has placed the target for gross capital expenditure at Rs 10.2 lakh crore in 2024-25.
“Given our expectations of a Rs 75,000-crore shortfall in capex for 2023-24, it would imply a sedate tear-on-year growth of 10 per cent compared with the expansion of over 20 per cent seen in each of the post Covid years.
The total expenditure is estimated to grow 5 per cent to Rs 47.4 lakh crore in 2024-25. Consequently, the quality of spending would improve further, with the share of capex in total expenditure projected to rise to 21.5 per cent in 2024-25 from the expected 20.5 per cent in 2023-24.
Elara Capital said the government has been prioritising capital spending, especially for railways, roads and defence. It expects this focus to continue, albeit at a moderate pace.
"We project FY25E capital expenditure to rise 20% on the back of 30.5 per cent growth in FY24E, which is lower than the budgeted growth of 37.4 per cent. We also do not rule out trimming of the budgeted allocation for the interest free 50-year loan to the states from the Centre by Rs 30,000 crore. Of the overall capex by the Centre, we see 60 per cent to be allocated to roads, railways and defence," it said.
The Railways have been investing heavily in capacity improvement works such as dedicated freight corridors, doubling/quadrupling, electrification and introducing an array of high-speed trains.
The national transporter-cum-infrastructure builder reported an operating ratio (OR) of 98.1 per cent in FY23 compared with 107.39 per cent in FY22. Operating ratio can be defined as the measure of the operational efficiency. Therefore, the lower the ratio, it is better.
The Railways have set ambitious goals, which involve producing 400 Energy Efficient Vande Bharat trains in collaboration with their technology partners. Currently, there are 41 Vande Bharat trains in operation, and the Railways are prepared for a transformative phase. They anticipate allocating an additional budget of Rs 40,000-60,000 crore for the fiscal year 2024-25 to ensure the smooth execution of their extensive project pipeline.
The government has set aside Rs 35,000 crore for new lines in 2023-24, Rs 45,000 crore for the Railway Safety Fund, and Rs 10,000 crore for the Rashtriya Rail Sanraksha Kosh. This capital infusion has led to the introduction of several new Vande Bharat trains as part of the government's initiative to operate 400 such trains.
Also read: Union Budget 2024: Why was the presentation date shifted to February 1 from February 28?