Ministries Deliver Mixed Bag On Capex
Fortune India|January 2022
A ₹5.54-lakh-crore booster shot for capital expenditure to kick-start the economic cycle has had a mixed effect. While some ministries have met targets, others have been extreme laggards. Is Centre's capex strategy working?
ASHUTOSH KUMAR

IN BUDGET 2021, finance minister Nirmala Sitharaman announced a capital expenditure of ₹5.54 lakh crore to kick start the investment cycle, a ₹1.42-lakh-crore increase from Budget 2020. The announcement assumed significance since it came in the backdrop of Covid-19 and the subsequent lockdown. The immediate question was the government’s ability to achieve the expenditure target amid supply chain disruptions and its own dwindling fiscal position due to the pandemic. However, the Centre had already readied an execution strategy — front loading allocations to ministries, which, in turn, would have to implement them with full vigour. It was now up to them to hit the ground running.

Eleven months later, while some have performed very well on the capex front, some others have been extreme laggards. Is Centre's capex strategy delivering?

Spending Boost

Nine months into the financial year, expenditure trends reveal during April-October FY22, spending surpassed the pre-pandemic level of FY20. According to the finance ministry, actual capital expenditure at ₹2,53,270 crore during April-October is 26% higher than ₹2,01,273 crore during the same period in FY20. The figure was ₹1,97,355 crore in FY21.

“Fiscal multiplier for capex is higher than revenue expenditure,” N.R. Bhanumurthy, vice-chancellor, Dr B.R. Ambedkar School of Economics, tells Fortune India, adding, the revised capex estimate for FY22 is likely to be higher than budget estimate. According to a 2019 RBI report, the central capex has a multiplier effect of 3.25.

Capex Diary

₹5,54,108 cr Budget estimate (BE), FY22

₹2,53,270 cr Actuals up to October

45.7 Actuals, as a percentage of BE

In a report dated December 2, rating agency Crisil observed that capital expenditure is “progressing at a rapid clip” and “multiplier effect can’t remain far behind”. Additionally, while announcing the outcome of the Monetary Policy Committee [MPC] meeting on December 8, Reserve Bank of India [RBI] governor Shaktikanta Das had said the government’s focus on capex should crowd in private investment, which has remained in a prolonged state of muted activity.

Continue reading your story on the app

Continue reading your story in the magazine

MORE STORIES FROM FORTUNE INDIAView All

Payments Banks' Trial By Fire?

Contrary to market perception, payments banks such as fino and airtel have turned profitable.

6 mins read
Fortune India
May 2022

Learning To Live With FinTech

It Takes Two To Tango, And Banks And Fintechs Are Increasingly Realising This. While Such Tie-ups Help The Former Slash Operational Costs, For The Latter, It Promises Access To A Wider Universe. In The End, It's A Win-win For Both.

10+ mins read
Fortune India
May 2022

India Inc's Tryst With Metaverse

Large Companies, Platforms, And Enablers Are Tapping An $8 Trillion Global Opportunity. Can It Live Up To The Promise?

10+ mins read
Fortune India
May 2022

Credit Suisse: India Adds To Global Balance Sheet

While The Switzerland-based Bank Is Facing Several Odds In Its Global Operations, The Indian Business Has Managed To Scale Up Considerably.

2 mins read
Fortune India
May 2022

India's D2C Brand Sweep

Brand-starved Bharat is fast embracing digital-first 'direct to consumer' brands. As competition heats up, it's financial heft and offerings that will differentiate. Who's ready?

10+ mins read
Fortune India
May 2022

PATHLABS: LIFE BEYOND COVID

Diagnostic chains reported bumper revenues and valuation during Covid-19 waves. Can they deal with the ebb to retain investor interest?

9 mins read
Fortune India
May 2022

GLOBAL SOVEREIGN DEBT TRAP

At $300 trillion of global debt, a 1% hike in interest rates could translate into $3 trillion additional interest outgo, equivalent to India's nominal GDP.

6 mins read
Fortune India
May 2022

DIGITAL AGILITY WILL DECIDE BANK WINNERS

WHILE DATA AND DIGITAL WILL DRIVE GROWTH, TRUST WILL BUILD A STRONG CUSTOMER BASE.

2 mins read
Fortune India
May 2022

SMALL FINANCE BANKS IN A LEAGUE OF THEIR OWN

SFBs ARE TAKING FINANCIAL INCLUSION BEYOND ACCOUNT OPENING AND CREATING INCOME OPPORTUNITIES IN REMOTE AREAS.

7 mins read
Fortune India
May 2022

THE BANKERS WHO SAW TOMORROW

THE MAIDEN FORTUNE INDIA-GRANT THORNTON BHARAT STUDY ON INDIA'S BANKS SHOWS WHAT IT TAKES TO WIN IN BANKING SWEEPSTAKES.

4 mins read
Fortune India
May 2022