With half a dozen states going to assembly elections by 2023-end, the Union government has asked all ministries to accelerate capital expenditure and spending on Centrally Sponsored Schemes (CSS). A similar advisory has also been issued to the Central Public Sector Enterprises (CPSEs) and departmental undertakings, including Railways and the National Highways Authority of India.
The idea is to maximise spending in the first half of the year so that at least 50% of annual budget capex is implemented by September-end and 75% by December-end. In the last fiscal year, these figures were 45.7% and 65.4%, respectively.
The Centre has raised the capex target by 36% on-year to Rs 10 trillion (including Rs 1.3 trillion capex loans to states) for FY24 from Rs 7.36 trillion (including Rs 81,200 crore to states) in FY23, to continue the public investment-led economic recovery.
“Ministries are undertaking a drive to expedite both capex and CSS expenditure within the first 2-3 quarters,” a senior government official told FE. He added that the ministries have been asked to make full use of the first half of the year rather than “this typical thing of waiting for the second half.”
Assembly elections are due by December in Chhattisgarh, Madhya Pradesh, Rajasthan, Telangana, Tripura and Mizoram. The Code of Conduct could hit the implementation of schemes by the end of 2023, as the administration gets busy with election-related work.
In FY23, there was a lot of back-loading of CSS expenditure as the Centre strictly implemented just-in-time release of funds and also asked states to return or spend past CSS funds lying idle with them up to March 31, 2022. As a result, states may not have fully utilised the revised CSS allocation of Rs 4.5 trillion in FY23. For FY24, the Centre has budgeted Rs 4.76 trillion for these welfare and development schemes.
The Centre is likely to extend to the second quarter of this fiscal the exemption from cash control norms granted to its ministries, centrally sponsored schemes and grants-in-aid in a bid to push capital expenditure. Observing a slower pace of capex in April, the Centre removed such restrictions for the first quarter of FY24. According to cash management guidelines, ministries were to attune bulk expenditure items to the monthly GST collection and quarterly advance tax payments for smooth exchequer control.
On June 19, Cabinet secretary Rajiv Gauba chaired a meeting of secretaries and senior government officers to review capital expenditure by the Centre and the state-run entities to ensure that project implementations are on track. The CPSEs and departmental arms are estimated to invest Rs 7.33 trillion (including the Centre’s support), 13% more than Rs 6.49 trillion in FY23.
The government believes that investment and consumer momentum will underpin solid growth prospects in the current financial year.
Of the Rs 1.3-trillion grant-like special capex facility for states in FY24, the Centre has already approved Rs 25,727 crore or 20% to nine states in the first two months of the year. Part of this has already been released to states.
To augment resources for the states to accelerate capital expenditure, the Centre has further advanced tax devolution to the first quarter of FY24 compared with such advance releases in the second quarter of the previous year. The Centre has released two installments of tax devolution totalling Rs 1.18 trillion for June instead of the normal monthly devolution of Rs 59,140 crore.