Even though the Centre’s budgetary capital expenditure declined an annual 7% in FY18, companies owned by it and other public-sector undertakings like NHAI and the Indian Railways have sustained their robust capex pace during the year, contributing in good measure to fixed assets creation in the economy amid slowly reviving private investments. These entities have exceeded their ambitious capex targets set at the beginning of the year, improving upon the accelerated pace gathered in FY17.
As many as 35 central public sector enterprises (CPSEs) and five departmental undertakings (DUs) with annual capex plans of Rs 500 crore and above invested Rs 4.41 lakh crore in FY18. That was 102% of the year’s target and a solid 16% annual increase.
More than 80% of the capex by these entities are from their own surpluses while the balance comes from the Union Budget. FE reported earlier that the budget capex was curbed moderately from the revised estimate (RE) level to Rs 2.67 lakh crore, one factor the Centre could keep the fiscal deficit below the RE (3.5% of GDP) at about 3.42%.
India’s gross fixed capital formation (GFCF) is expected to grow an annual 7.6% this fiscal, compared with a growth of 10.1% last year, according to the latest Central Statistics Office (CSO) forecast.
The capex data from the specified CPSEs and DUs signal that public spending, which was a key growth driver in FY17, retained that role in FY18 as well.
Among the government agencies, railways was the largest investor in FY18, followed by the NHAI, ONGC and NTPC (see chart). Railways, which is a key driver of public capex, fell short of its investment target by about 15% in FY18 as budgetary support to the carrier was cut by Rs 15,000 crore to Rs 40,000 crore.
The NHAI, which constructed 9,829 km of highways during the year, invested about Rs 83,348 crore and was on target. The overall capex was also aided by ONGC’s acquisition of the government’s 51.1% stake in HPCL for about Rs 37,000 crore, although this doesn’t strictly represent new asset creation in the economy. The oil explorer’s capex, therefore, was a whopping 241% of target.
NTPC, which has about 24 GW of capacity under construction, invested Rs 27,416 crore, or 98% of its FY18 target. Of the 40 CPSEs and departmental agencies, 16 including Steel Authority of India, Chennai Petroleum Corporation, Mangalore Refinery & Petrochem and Coal India achieved more than 100% of their annual investment targets.
Growth in GFCF jumped 12% in the third quarter of FY18, even on a relatively unfavourable base (it had expanded a revised 8.7% in Q3FY17). Analysts said the double-digit growth of capital goods, the sharp rise in the government’s capital spending (it doubled to Rs 90,207 crore in Q3FY18 from a year before) and the modest pick-up in the capital spending of the state governments in Q3FY18 may have contributed to the 12% expansion in GFCF in Q3FY18.