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Even as the Narendra Modi-led government looks to revive the investment cycle through public investment-led infrastructure spending, the Centre's capital expenditure in the first half of the current financial year (started April 1), is likely to rise a little more than 25 per cent over the year-ago period, to Rs 1.25 lakh crore.
In 2014-15, capital expenditure in the April-September period was Rs 99,100 crore, a rise of only 2.3 per cent over the corresponding period the previous year.
While expenditure in a given year is front-loaded, most of that is administrative spending on day-to-day running of the government. For the April-September period of any financial year, capital spending on public infrastructure projects and schemes usually is around 45 per cent of full-year non-Plan spending and 40 per cent of Plan spending targets.
This financial year, however, capital spending as part of non-Plan expenditure could be as high as 50-55 per cent of the full-year target of Rs 1.06 lakh crore. This means up to Rs 58,000 crore would be spent in the first half. And, as part of Plan expenditure, it could be as high as 45-50 per cent of the full-year estimate of Rs 1.35 lakh crore - an expenditure of up to Rs 67,500 crore in the April-September period.
By comparison, total capital spending in April-September was Rs 99,100 crore in 2014-15, a mere 2.30 per cent rise over the Rs 96,870 crore in 2013-14, which was an increase of 21.30 per cent over Rs 79,850 crore in 2012-13. The rise in 2012-13 was 11.23 per cent when compared to the Rs 71,785 crore in 2011-12.
There have been clear signs of this from the first month of the current financial year. At the end of April 2015, capital spending under non-Plan expenditure was as much as 14 per cent of the full-year target, compared with 5.4 per cent in April 2014. Under Plan expenditure, capital spending was 8.2 per cent at the end of April, compared with 5.5 per cent during the same period a year ago.
Senior government officials have told Business Standard there had been an effort from all central government ministries and departments to spend as much as they could on public infrastructure schemes under their control.
Over the past few weeks, officials from the finance ministry's expenditure department have spoken to counterparts in other ministries and stressed on the need to utilise the allocated capital expenditure budget. Sources say there has been no official memo or notification. Rather, such conversations have been at an informal level over phone, at a bureaucratic level.
"The other ministries and departments have been told to spend as much of their 'works' capital allocation as they can. This is to again push growth through higher government spending in infrastructure," said a senior official with knowledge of the matter.
In his Budget 2015-16, Finance Minister Arun Jaitley had delayed the government's earlier fiscal consolidation road map by relaxing the deficit target for 2015-16 to 3.9 per cent of gross domestic product, against 3.6 per cent earlier. This move freed an additional Rs 70,000 crore for spending on infrastructure projects.
The official quoted above said most of that additional amount would be spent by September. Another second official said the various ministries might even be given more money for spending on infrastructure schemes and projects in the second half of the year, under the Supplementary Demand for Grants in the winter session of Parliament - if necessary, and if there is fiscal space.
The second official added the money spent would be used in a number of headline initiatives and sectors on which that Jaitley and Prime Minister Narendra Modi have renewed the government's focus. These include railway infrastructure projects, industrial corridors, smart cities and urban renewal initiatives.
The push for public investment in infrastructure to boost growth was mooted by Chief Economic Advisor Arvind Subramanian in his mid-year economic analysis in December last year, as balance sheets of private players were over-stretched. "It seems imperative to consider the case for reviving public investment as one of the key engines of growth going forward, not to replace private investment but to revive and complement it," he had said in the report. The idea was taken forward in the Economic Survey 2014-15 and Union Budget 2015-16.
The government has projected the country's economic growth to be in the range of 8.1-8.6 per cent in the current financial year against 7.3 per cent in 2014-15. Most global and domestic agencies, including the IMF, the World Bank and ADB, have pegged it at 7.5-7.8 per cent.
