Centre may lower FY25 capex target due to expected shortfall

The Centre is likely to revise lower the capital expenditure (CAPEX) target for FY25 due to a “slower pace of spending,” according to sources in the Ministry of Finance.

The government had initially set a CAPEX target of Rs 11.11 lakh crore for FY25, reflecting a 16.9% increase from the revised estimate of Rs 9.48 lakh crore for FY24. 

However, challenges related to fiscal management and a shift in focus to short-term expenditures during the extended election period may be affecting CAPEX performance, sources added.

As per the latest data available from the Controller General of Accounts (CGA), the government has managed to spend only Rs 3.09 lakh crore on CAPEX by August 2024, which is 27% of the full-year target. 

This leaves a shortfall of 73%, with just seven months remaining in the financial year. By comparison, the Centre had achieved 37.4% of its CAPEX target in the same period last year.

In FY25, the Centre had pegged an estimate of Rs 10.01 Lakh crore, but missed its target by Rs 50.7 K crore, largely due to lower-than-expected utilisation of the capex loan scheme by states. 

While Rs 1.3 lakh crore was initially budgeted under the Special Assistance as Loan to States for Capital Expenditure scheme, the revised estimate for FY24 stands at Rs 1.06 lakh crore and the allocation for FY25 remains at Rs 1.3 lakh crore.

The Ministry of Finance has already begun pre-budget consultations with various ministries and departments. These meetings aim to finalise revised estimates for FY25 and discuss projections for FY26.

The consultations will conclude by November 11, after which Finance Minister Nirmala Sitharaman will hold sector-wise discussions with industry representatives for the FY26 Budget to be held in February 2025.