Central govt commits to sustaining capital spending despite fiscal deficit concerns

  • Industry News
  • Sep 21,23
The official emphasised that the Central government's objective is to encourage departments to accelerate capital expenditure (capex) in the current fiscal year to support economic growth.
Central govt commits to sustaining capital spending despite fiscal deficit concerns

A senior official has stated that despite the need to reprioritise certain revenue expenditures in an effort to contain the fiscal deficit at 5.9% of the gross domestic product (GDP), the central government does not intend to reduce its capital spending from the record Rs 10 lakh crore budgeted for FY24. The finance ministry has called upon departments to submit their budget and expenditure trends by October 5, and it is anticipated that a substantial portion of the potential additional spending in FY24 on select schemes will be covered by savings from other areas and the reduction of less critical revenue expenses.

The official emphasised that the Central government's objective is to encourage departments to accelerate capital expenditure (capex) in the current fiscal year to support economic growth. There are no plans to cut capex, and states are also being encouraged to fully utilise their allocated share of the Centre's capex budget for FY24. Out of the Rs 10 lakh crore capex outlay for FY24, Rs 1.3 lakh crore has been allocated as long-term, interest-free loans to states to promote the creation of durable assets.

In the first four months of FY24, the Central government's fiscal deficit reached 33.9% of the annual target, significantly higher than the 20.5% recorded in the previous year. However, it's important to note that the deficit until July remains well below the five-year average of 69%. During this period, capex surged by nearly 52% compared to the previous year, reaching Rs 3.17 lakh crore, exceeding the budgeted annual increase of approximately 36%. Meanwhile, revenue expenditure increased by 15.9% year-on-year until July in this fiscal year, reaching Rs 10.64 lakh crore, significantly surpassing the targeted annual growth of 1.5%. This increase was partly attributed to a 59% rise in fertiliser subsidies compared to the previous year. Concurrently, net tax revenues for the Centre decreased by 12.6% until July in this fiscal year, amounting to Rs 5.83 lakh crore.

These developments have raised concerns among some analysts regarding potential fiscal slippage, especially as they anticipate an increase in welfare expenditures leading up to the 2024 general elections, unless the government decides to trim capex.

Source: Indiatimes


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