Even though the Centre has accelerated capital expenditure in the past few years, aggregate public-sector capex has declined as a fraction of the Gross Domestic Product (GDP) between FY21 and FY23. This is because of a stagnation in capital spending by states, and a sharp deceleration in such spending by central public sector enterprises (CPSEs).
What has happened in the last two-three years is primarily a shift of capital spending away from companies owned by the Centre to its Budget. Of course, state PSEs too contribute to public capex, but aggregate data from them is not available.
The combined capex of the Centre, states and CPSEs in FY23 at 5.7% was the lowest in eight years, a report by Motilal Oswal Financial Services (MOSFL) showed. The decline in such aggregate public sector capex is largely due to consistent drop in capex incurred by the CPSEs. In FY23, capex incurred by CPSEs was at 1.3% of the GDP, which was the lowest in at least eight years.
A drop in CPSEs capex could be attributed to the rise in dividend payments by them to the Centre over recent years and the high capex spending in earlier years, which have reduced their cash resereves. In FY23 and FY22, the dividend payments by CPSEs were around Rs 59,000 crore, the highest since at least FY16.
For this year, the aggregate capex is projected at 6.7%. The Centre’s capex, as a percentage of GDP, is pegged at 2.7% and that of states is projected at 2.9%. CPSEs capex as a ratio of GDP is pegged at 1.1%.According to MOSFL, however, the historical trend of capex suggests that aggregate public sector capex could be around 6.1% of GDP in FY24.
In April-August this fiscal, the Centre has incurred a capex of Rs. 3.74 trillion, up 48.1% y-o-y.
The combined capex of a dozen big states, whose Q1FY24 finances were reviewed by FE, rose 81% on year to around Rs 64,650 crore in the quarter, compared with a 16% decline in the year-ago quarter.