Centre looks to front-load capex, use 60% of budgeted amount by October

The Centre is looking to frontload its capital expenditure for the current fiscal and plans to use at least 60% of the budgeted Rs 10 lakh crore for 2023-24 by October or November.

While this is a break from tradition, as typically a bulk of the capital expenditure takes place in the second half of the year after the monsoon rains, sources indicate that the strategy has been changed this fiscal in view of the approaching elections and the need to maintain the growth momentum.

The government has been focusing on higher capital expenditure as a means for economic recovery in the wake of the Covid-19 pandemic, especially as the private sector has remained cautious in stepping up investment activities.

According to sources, the finance ministry has been urging large central public sector enterprises to use a large part of their capex by October or November this year. Large infrastructure ministries such as railways and highways are also focusing on using a significant chunk of their capital expenditure outlays for the fiscal over the next few months.

The thrust on capex is also evident in the monthly accounts of the Union government. As per data released by the Controller General of Accounts, the Centre had utilised Rs 2.78 lakh crore or 27.8% of the full year target of Rs 10 lakh crore for capex between April-June 2023. This was much higher than Rs 1.75 lakh crore in the corresponding period last fiscal. In fact in June 2023 as much as Rs 1,10,691 crore was disbursed as capital expenditure as against Rs 89,332 crore in May.

Experts have also highlighted the higher capex by the Centre this fiscal.

“Setting a tone for sustained infrastructure growth this fiscal, the central government has front-loaded capital expenditure. It has not only ramped up its outlay, but also picked up the pace of allocation,” Crisil said in a recent note. It has expended 28% of the total budgetary outlay in the first quarter itself, the highest utilisation in percentage terms for the first quarter in the past five fiscals, it further said, adding that the spend has been led by the ministry of road transport and highways and ministry of railways.

A report by Bank of Baroda noted that with private investment still nascent, government spending continues to be the major driver of growth. “Given the known multiplier effect of capital expenditure, government has focused its attention on increasing its spending on growth and employment generating capital intensive projects. This is evident in a substantial increase in the Centre’s capex spending in the first quarter of the fiscal,” it said.

Additionally, the Special Assistance to States for Capital Investment that has been extended by the Centre to states is also doing well and approvals have crossed 40% of the allocated target for the fiscal. In FY24, Rs 56,415 lakh crore has already been disbursed to 16 states, as against an allocation Rs. 1.3 lakh crore set out in the Budget. “Approval has been given for a number of capital investment projects in sectors such as health, education, power, roads, railways etc,” the report said.