New Delhi: Capital expenditure by central infrastructure ministries, central public sector enterprises (CPSEs) and state governments is expected to contract in FY25 – something that could prompt policymakers to take up the matter in the upcoming Union budget, the Mint reported.
The contraction is likely to come after a five-year high of 5.87% of the GDP in FY24. Experts have raised concerns that this could slow the growth of the economy.
“While the overall capital expenditure in FY25 is expected to meet the target or reach close, the growth could be lower than the previous fiscal,” people familiar with the matter told the Mint.
In FY24, capex by the Union government, CPSEs and states marked an increase to Rs 17.35 lakh crore against Rs 13.57 lakh crore in FY23. Reports show that in the previous financial years, capex had fluctuated.
According to the latest data by the Controller General of Accounts, in the first half of the financial year, the Union government’s capex was down 15.4% year-on-year to Rs 4.15 lakh crore. As a result, the second half of FY25 will pose a challenge as it will require a capex growth of 52% to meet the Budget target of Rs 11.11 lakh crore during FY25, The Indian Express reported.
Also read: Watch | ‘Rs 10 Lakh Crore Capex Claim Misleading, Unlikely to be Fully Used’
Given the concerns, the Union government has already directed departments and ministries to speed up the spending for the ongoing quarter to avoid piling of capex in the January-March quarter.
“The Centre will continue its capital expenditure push in the upcoming budget to bolster economic growth, while also encouraging states to follow suit,” the official told Mint.
The Ministry of Finance has also released Rs 50,571.42 crore to states as part of its ‘special assistance for capital investment’ scheme to be used to speed up capital expenditure during the first eight months of the ongoing fiscal.
In her budget speech in July, finance minister Nirmala Sitharaman had allocated Rs 1.5 lakh crore for the Union government’s ‘special assistance for capital investment’ scheme for states for FY25, up from Rs 1.3 lakh crore planned in the interim budget.
