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?
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.
₹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.
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