Capital expenditure by CPSEs accelerates to 43% of FY23 target in H1

The capital expenditure of central public sector enterprises (CPSEs) with targets over Rs 100 crore in the first half (April-September) of fiscal year FY23 touched 43 per cent of the annual target of Rs 6.62 trillion.

CPSEs were able to exhaust only 37 per cent of the Rs 5.95-trillion target during the same period in FY22.

While CPSEs spent Rs 2.8 trillion in capex in the first half of FY23, they had invested Rs 2.19 trillion during the year-ago period, registering 27.85 growth per cent.

“The CPSEs are taking the capex targets seriously as it is one of the parameters in the memorandum of understanding they have signed. It helps the government undertake their performance evaluation and decide upon performance-related pay,” said a source.

The capex spending of these PSUs are being reviewed by the PMO (Prime Minister’s Office) regularly.

The Centre has been focusing on a capex-led recovery of the economy through the exchequer as investments from the private sector lag.

In the Union Budget 2022-23, Finance Minister Nirmala Sitharaman had announced a 35.4 per cent increase in the capex outlay to Rs 7.5 trillion in order to “crowd-in” private investments.

So far during the April-August period of FY23, the Centre has been able to spend only 33.7 per cent of its full-year capex target, according to the latest data available from the Controller General of Accounts.

During 2021-22, 28 banks and financial institutions that were actively involved in financing reported 403 projects, significantly higher than 220 projects reported during 2020-21 and 2019-20, mainly due to an increase in small-ticket projects. 

Though the envisaged total project cost of Rs 1.4 trillion in FY22 almost doubled as compared to the record low of Rs 75,558 crore in 2020-21 on the back of Covid-induced restrictions, it remained lower than the pre-Covid levels of Rs 2 trillion in FY20.

Last month, Sitharaman wondered why the Indian businesses weren’t stepping up capital spending despite corporate tax cuts, production-linked incentives, and other fiscal measures. 

The Reserve Bank of India in its August monthly bulletin said going forward, improved private corporate balance sheet, rising capacity utilisation level, robust demand sentiments, higher capital spending, and the government’s policy initiatives were expected to revive the capex cycle for the private sector.  

“The near-term outlook for private investment activity in India is gauged from project investment proposals of the private corporate sector. With the resumption of business activities and improving demand conditions after the ebbing of the Covid-19 pandemic, announcement of new projects increased significantly during 2021-22, especially infrastructure projects. Of the total capex investment envisaged during 2021-22, more than one third is expected to be spent in 2022-23,” it said.