Look Beyond Roads, Rail In Capex

The capex push has focused on road and rail sectors. Budget needs to look at other infrasturure segments for holistic growth.

- ASHUTOSH KUMAR

IN LAST FIVE YEARS, the Union government has spent ₹19.26 lakh crore on capital assets to keep growth ticking when almost all other engines of the economy were running in slow motion. With global recession looming, the coming Union Budget is again expected to announce huge capital spending to prevent the economy from stalling.

This is not incidental. Since FY19, central government has made a strategic shift in infrastructure spending. Instead of treating capital expenditure as just an accounting entry under expenditure budget, it decided to use it to fire up the economy. The result: Total revised allocation of ₹17,07,404 crore between FY19 and FY22 exceeded the total Budget estimate of ₹16,05,331 crore during the period. While this has helped India wade through many challenges in last four years, namely uncertainties of U.S.-China trade war, economic slowdown of 2019 and the mother of all crises, Covid 19, experts say there is a need to refine the strategy. The reason: Most of this expenditure has gone into building road and railway assets at the cost of segments such as health and urban infrastructure that are equally important for country’s holistic development (see... But Highways, Railways Get Special Treatment).

Capex Focus

Until FY17, Union governments used to reduce capital expenditure whenever their accounts were under pressure to maintain fiscal balance. Union Budget FY19 was a turning point. Since then, capital expenditure has never been reduced to bring down fiscal deficit in the hope that infrastructure-led growth will eventually attract private investment.