The Centre has maintained a brisk pace in its capex in April-May and intends to achieve the target of Rs 4.12 lakh crore for FY21 compared with Rs 3.37 lakh crore in FY20.
With cash-strapped states cutting down on their capital expenditure, finance minister Nirmala Sitharaman on Tuesday impressed upon central public sector enterprises (CPSEs) to stick to their capex targets, in order to help the economy recover from adverse impact of Covid-19.
In a video conference with CMDs of 23 CPSEs, Sitharaman reviewed Rs 1.65-lakh-crore capex plan of these select CPSEs for this fiscal.
Public capex has been a key driver of economic activities in the past few years in the absence of strong private support. In recent years, the ratio of public capex has been roughly in the 5:5.5:3.5 ratio among the CPSEs, states (budget) and the Centre (budget).
While revenue constraints led to a slowing of capital expenditure by state governments in FY20, the CPSEs owned by it largely held the fort, preventing public expenditure from losing its share in the gross domestic product (GDP).
The Centre has maintained a brisk pace in its capex in April-May and intends to achieve the target of Rs 4.12 lakh crore for FY21 compared with Rs 3.37 lakh crore in FY20. States, which together invested Rs 4.5 lakh crore in FY19 and were estimated to spend Rs 5.8 lakh crore in FY20 (actual to be a bit lower), have virtually halted capex so far in FY21 due to cash crunch as tax revenues have slowed down significantly after outbreak of Covid-19.
Many including IMF and rating agencies project India’s GDP to shrink by 4-5% or more in FY21. The country’s GDP growth slowed to an 11-year low of 4.2% in FY20 and the Centre’s fiscal deficit in FY20 was revealed to be 4.6% of GDP, the highest level since FY13.
The meeting with CPSE chiefs was held as part of the series of meetings that the finance minister is having with various stakeholders to accelerate the economic growth, the finance ministry tweeted. She encouraged CPSEs to perform better with timely achievement of targets. Better performance of CPSEs can help the economy in a big way to recover from the impact of Covid-19, Sitharaman said.
The combined capital expenditure by the CPSEs and departmental undertakings like NHAI and Indian Railways with annual capex budgets above Rs 500 crore, turned out to be Rs 4.41 lakh crore in FY20. This was 90% of the Rs 4.9-lakh-crore target for the year and 1.1% higher than the capital spending by these entities in the previous year.
In FY20, state governments developed cold feet in sustaining the capex tempo, but CPSEs, despite an erosion of their cash surplus and profits in a slowing economy, acquitted themselves. The CPSEs’ creditable capex achievement was despite their being used as a milch cow by the revenue hungry Centre over the last few years in the wake of sluggishness in the private sector — they have had to fork out huge and extra sums as dividends to their principal owner and often come to its aid to bail out disinvestment plans.
The CPSEs (excluding FCI but including departmental arms) are estmated to invest about Rs 4.49 lakh crore from their internal accrual and borrowings in FY21, down from about Rs 5 lakh crore in FY20RE (actual to be a little lower).