Slowing capex

Recognising growth dynamics is necessary instead of changing norms to chase expenditure targets

- A K BHATTACHARYA

A slowdown in the Union government's capital expenditure is not only evident but it has already raised doubts over the achievability of the target of spending ₹11.11 trillion, as budgeted for 2024-25. By way of comfort, however, officials in the Union finance ministry have indicated that the sharp fall in capital expenditure in the first half of the year should be corrected in the second half and annual expenditure could be slightly higher than in 2023-24.

Remember that the Centre's capital expenditure last year was estimated at ₹9.48 trillion, representing a rise of 28 per cent over that in 2022-23. It has been growing at a rapid pace after Covid. In the last four years, it has seen a compound annual growth rate of over 29 per cent, an unprecedented achievement. And this growth was ensured after strictly monitoring expenditure disbursements to ministries and even to states to prevent wastage and misuse. Steps were taken to improve the quality of expenditure by making sure that the central ministries did not bunch up their spending in the last quarter of the year or the states did not substitute their own expenditure with what they were getting from the Centre.

Now, it seems those guardrails are being relaxed to ensure that some growth in capital expenditure is maintained in the current year as well. Senior finance-ministry officials have reportedly stated that curbs under cash-management guidelines could be relaxed in the January-March quarter of 2025. In other words, central ministries and departments could spend more than 33 per cent of their annual capital expenditure estimates in the final quarter this financial year.