Capital Budget — Indian Economy (2024)

FAQs

What is capital budgeting in India? ›

Capital budgeting is an effective instrument that allows you to assess and measure the value of a project throughout its entire life cycle. It allows you to evaluate and rank the profitability of projects or investments that demand a significant amount of capital.

Parts of Capital Budget: Capital budget is divided into two parts — capital receipts and capital expenditure. Capital receipts refer to incoming cash flows. They can be both non-debt and debt receipts. Loan from the general public, foreign governments and RBI form a major part of capital receipts.

India's capex in FY21 and FY22 stood at Rs 4.1 lakh crore and Rs 5.9 lakh crore, respectively. Finance Minister Nirmala Sitharaman today proposed to raise the capital expenditure target by 11.1% to record Rs.

A capital budget is a long-term plan that outlines the financial demands of an investment, development, or major purchase. As opposed to an operational budget that tracks revenue and expenses, a capital budget must be prepared to analyze whether or not the long-term endeavor will be profitable.

Capital budgeting is a process that businesses use to evaluate potential major projects or investments. Building a new plant or taking a large stake in an outside venture are examples of initiatives that typically require capital budgeting before they are approved or rejected by management.

CapEx spending is important for companies to maintain existing property and equipment, and invest in new technology and other assets for growth.

The Revised Estimate of the total expenditure is Rs 44.90 lakh crore. The revenue receipts at Rs 30.03 lakh crore are expected to be higher than the Budget Estimate, reflecting strong growth momentum and formalization in the economy.

Capital Budget focuses on long-term investments like infrastructure and assets, while revenue Budget pertains to day-to-day operational expenses. Capital Budget includes capital expenditure and loans, while Revenue Budget comprises revenue receipts and revenue expenditure like salaries and maintenance costs.

Answer: Capital budgeting is officially a part of investment decisions. It helps in working on the ideas and projects which in turn helps the company in earning more revenues through the investment.

India's debt-to-GDP ratio is above 80% and interest payments make up a quarter of the government's total expenditure. Transportation and defence spends are the second and third largest expenses for the government. In 2024-25, apart from interest payments, rural expenses have seen the sharpest increase of 11%.

What is the single largest expenditure in India? ›

Interest payments accounts for 20%, the single largest component of the Centre's total expenditure. Market borrowings through G-Secs & Treasury Bills accounts for 68% of the total sources of financing the fiscal deficit.

The single largest item of expenditure of the Central Government in India in recent years is interest payments. The major items of the expenditure in Indian Government budget are: interest payments, subsidies and defence expenditure.

Capital Budgeting Explained

It is a way of measuring potential risks against the expected return on investment. Decision-makers use this to analyze investments of equipment to expansions and takeovers. For smaller companies, decision-makers often take on multiple financial roles.

There are four types of capital budgeting: payback period, net present value (NPV), internal rate of return (IRR), and avoidance analysis.

The process of capital budgeting involves the steps like Identifying the potential projects, evaluating them, selecting and implementing the projects, and finally reviewing the performance for future considerations.

Capital budgeting is the process businesses use to analyze, prioritize, and evaluate large-scale projects that require vast amounts of investment. It is used to choose projects that mainly add value to an organization. Some examples of projects that require capital budgeting are: Purchasing a new facility.

Capital budgeting refers to application of appropriate capital budgeting technique (one or more) to evaluate any capital budgeting proposal and take capital budgeting decision.

Multinational capital budgeting involves evaluating and making investment decisions for projects or assets in different nations or currencies. The process can be complex due to the various factors that need to be considered, including exchange rate risk, political stability, and international regulations.