Centre to exceed 7.5 trillion capex target for FY23 | The Financial Express

Centre to exceed 7.5 trillion capex target for FY23

The stance of the government is important given the tepid recovery of private investments.

Centre to exceed 7.5 trillion capex target for FY23
The Centre has budgeted a capex of Rs 7.5 trillion for FY23, up 27% from the actual spending of Rs 5.93 trillion (up 39% on the year) in FY22. (IE)

The Centre will exceed the budgetary capital expenditure target of Rs 7.5 trillion for FY23 even as it will curb revenue spending to the extent possible to remain within the fiscal deficit goal of 6.4% of GDP, a senior government official told FE.

The stance of the government is important given the tepid recovery of private investments.

“There is an acceleration in big-ticket investments by infrastructure ministries such as railways and roads as well as by defence,” the official said.

This is even though some departments and ministries are facing difficulties after the Centre implemented a new expenditure management mechanism for central sector schemes from April, under which monies will be released from the Consolidated Fund of India directly to the bank accounts of implementing agencies ‘just in time’ for use. The implementing agencies were asked to return unspent balances by July for funds released till March 2022, before seeking fresh funds. This has led to a slowdown in capital spending by some departments as they have to go through a tedious process.

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“The departments that are likely to be impacted by the curbs are relatively small ones. At the macro level, it would have no bearing on capex goal for FY23,” the official added.

Gross fixed capital formation in the June quarter jumped 20.1% from a year before, against 5.1% in the previous quarter, driven substantially by the public sector, especially the Centre’s budgetary capex.

The Centre has budgeted a capex of Rs 7.5 trillion for FY23, up 27% from the actual spending of Rs 5.93 trillion (up 39% on the year) in FY22. Of course, about Rs 1 trillion of the current fiscal’s target will be spent by states, as they have been provided loan support to boost their asset creation.

The Centre continued its capex momentum by almost doubling the spending on year in July to Rs 33,606 crore while it invested 62% more on year or 2.09 trillion in April-July of the current fiscal. Ministry of road transport and transport has incurred 43% of its FY23 capex target of Rs 1.88 trillion in April-July while railways have invested 42% of its budget allocation of Rs 1.37 trillion during the period.

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Defence capex, which stood at 26% of FY23 target of Rs 1.52 trillion in the first four months of the year, is set to accelerate soon as most of the procurements are being done locally now. In June, the government had approved for capital acquisition proposals of the armed forces amounting to Rs 76,390 crore under ‘Buy (Indian)’, ‘Buy & Make (Indian)’ and ‘Buy (Indian-IDDM)’ categories.

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