Big spending push ahead of state elections.
The Centre has set a target to undertake budgetary capital expenditure of Rs 6 trillion or 60% of the Budget Estimate for FY24 in the first half of the current financial year, as it seeks to minimise the adverse effect of the global demand slump on the economy. The scaling up of capex is also meant to avoid disruptions in the implementation of projects as several states will go to elections in the third quarter.
In the corresponding period of the previous financial year, the Centre’s capex was at Rs 3.4 trillion or 45.7% of the respective annual target of Rs 7.5 trillion.
The Centre’s capex in the April-June quarter came in at Rs 2.78 trillion or 27.8% of the FY24 target compared with 23.4% of the corresponding target in the year-ago period. The increase could be attributed to the Centre’s diktat to all ministries to accelerate capital expenditure in H1FY24, with half a dozen states going to assembly elections by 2023-end. To facilitate this, it has also exempted the ministries from various cash control norms.
Besides removal restrictions on capex, faster release of interest-free capex loans to states to accelerate development spending is expected to take overall capex to around 60% of the FY24 target by September, a senior official told FE.
The Centre has raised the capex target by 36% on-year to Rs 10 trillion (including Rs 1.3 trillion capex loans to states) for FY24 from Rs 7.36 trillion (including Rs 81,200 crore to states) actual spending in FY23, to continue the public investment-led economic recovery.
While the Centre spent released around Rs 20,000-25,000 crore to states in Q1FY24, such releases could reach Rs 80,000-90,000 crore by September. Even though the Centre had a Rs 1 trillion capex loan scheme in FY23, the disbursements actually began post-September 2022.
Among ministries, budgetary capex spending by railways is the highest, followed by roads. In April-June 2023, the railways have already invested Rs 78,670 crore or 33% of the annual budgetary support of Rs 2.4 trillion. Railways’ budgetary capex was up 70% on year in Q1FY24.
Budgetary spending on roads and highways rose 24% on year to Rs 99,645 crore in Q1FY24 or 39% of the annual target of Rs 2.59 trillion.
Besides budgetary capex, the Centre is pushing the central public sector enterprises and departmental arms to accelerate their capex to supplement the capex-driven fiscal policy to boost economic activity and growth. These entities, with a minimum annual capex of Rs 100 crore, have invested about 32% of their target of Rs 7.3 trillion (including budgetary support) for FY24.
The push by the Centre has helped the states to expedite capex projects in the first quarter after a relative slowdown in pace witnessed in the last financial year. The combined capex of a dozen big states, whose Q1FY24 finances were reviewed by FE, rose 81% on year to around Rs 64,650 crore in the quarter, compared with a 16% decline in the year-ago quarter.
Excluding the interest-free capex loans of about Rs 20,000 crore released by the Centre to these states in the April-June 2023, their capex growth in the period came in at 25%.After registering a robust 33% growth in FY22, states’ capital spending, net of the loans from the Centre, saw just 6% growth in FY23. This was against an ambitious target of 38%.
Source;financialexpress.com