Even as the government has kept a lid on revenue spending, it doesn’t plan to hold back such expenditure for key departments in the second half of this fiscal.
Official sources indicated that while capex remains the focus of the government due to its high multiplier effect, even revenue expenditure in the infrastructure departments that facilitate asset creation and help spur economic growth won’t be curbed. The finance ministry will hold consultations with various ministries from Monday to firm up revised estimates of the Budget for FY23.
“There are certain types of revenue expenditures that act as enablers for durable asset formation. So, it’s important to keep spending in those areas,” one of the sources said. As FE has reported, the government will step up focus on the prudent use of funds by departments to ensure that an anticipated growth slowdown in the second half of this fiscal is not hampered further by undue fiscal stinginess.
Sources said some infrastructure ministries/departments that have not spent much so far this fiscal are being nudged to improve their expenditure level. For instance, between April and August, the civil aviation ministry has spent just 4% of its full-year revenue and capital spending target. The telecommunications department spent just 2% of its full-year capex target in the first five months of this fiscal and its revenue expenditure was to the tune of 33% of the target. The revenue and capital spending of the urban affairs ministry touched just 14% and 25%, respectively, of the FY23 targets.
While the revenue expenditure of the road, transport and highways ministry stood at 50% of the full-year target until August, it was lower than that of 56% (of the relevant target) a year before. Similarly, its capital spending of 58% of the FY23 target was lower than that of 67% a year before. The shipping ministry’s revenue spending stood at just 37% of the FY23 target, while its capex was even lower—27%.
The Centre’s revenue expenditure contracted in each of the three months through August, showed the latest official data. After decent spending in the first two months, revenue expenditure shrank 0.3% in June from a year before, 12.4% in July and 4% in August. In the first five months of this fiscal, revenue spending dropped 3%, despite decent spending in April and May. In contrast, capital expenditure jumped almost 47% in the first five months, partly aided by a conducive base, although such spending in August rose just 0.5%.
The finance ministry has made it clear to all departments that budgetary funds for capex won’t be curbed. The Centre has set its capex target of Rs 7.5 trillion for FY23, which includes interest-free loans of Rs 1 trillion to states for such expenditure.
The World Bank has slashed its FY23 growth forecast for India to just 6.5% from 7.5% predicted in June. On Friday, chief economic advisor V Anantha Nageswaran stated that India might have to live with a sub-7% growth in the near term. It’s, therefore, crucial not to falter on spending in the second half of this fiscal when growth is expected to slow down, given the external headwinds and tightening interest rate scenario.
The government had budgetted revenue expenditure of Rs 31.95 trillion for FY23, down 0.2% from a year before. Its budgetary capex of Rs 7.5 trillion for FY23 marks a 26.5% increase over the previous year. Of course, both expenditure and revenue mop—up targets are set to be breached.