Govt’s capital expenditure drops in first quarter; remains 18% of annual budget estimates

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Updated: September 27, 2019 1:39:48 PM

The government made a capital expenditure of 29 per cent of the annual budget estimates during April-June 2018, which dropped to 18.8 per cent in the same period this year.

fiscal deficit, capex, capital expenditure, revenue receipts, revenue expenditure, what is capital expenditureCapital expenditures are the funds used to acquire, upgrade, and maintain physical assets such as property, buildings, an industrial plant, technology, or equipment.

As Finance Minister Nirmala Sitharaman meets with Secretaries and Financial Advisors of key ministries today to review the capital expenditure, the latest data suggests a major fall in the government’s capital expenditure in the first quarter of the current fiscal year. The government made a capital expenditure of 29 per cent of the annual budget estimates during April-June 2018, which dropped to 18.8 per cent in the same period this year, according to a Department of Economic Affairs report. Capital expenditures are the funds used to acquire, upgrade, and maintain physical assets such as property, buildings, an industrial plant, technology, or equipment, which can foster growth into the economy.

Also Read: What is Capital Expenditure?

Thus, CAPEX has an important role to play in the current status of the economy, which is struggling with a lack of demand and investment. High capital expenditure usually means more investment by the government towards the creation of infrastructure and other assets that are crucial for rapid economic growth. Capital expenditure also covers the acquisition of equipment and machinery by the government, including those for defence purposes.

Also Read: Nirmala Sitharaman to meet key ministries today; will review capital expenditure so far in FY20

Meanwhile, the revenue receipts of the government are also facing a downturn with revenue receipts, non-debt capital receipts, and non-debt receipts remaining lower than the previous year’s first-quarter level. However, despite the low receipts in Q1 FY20, the gross fiscal deficit has improved over the last year, due to lower capital expenditure by the government. 

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