Centre pushes transfer to states to meet capital expenditure goals

Capital expenditure (capex) in the country in November declined 9 per cent over the previous month amid expectations that it would intensify in the second half this financial year.

 

The data released by the Controller General of Accounts (CGA), however, shows a positive trend in the transfer to states, which has grown 5 per cent in April-November this financial year from a year-on-year decline of 20 per cent during April-October 2024-25. 

In what could ensure utilisation of more funds, the CGA data showed the highest amount of loans disbursed for capex in any single month this financial year was in November with the Centre releasing Rs 18,486 crore as against Rs 12,503 crore in October. 

 

Experts feel despite government efforts there has been a lag in capex pick up but there is a good case for continued push towards such expenditure.   

“The reason for push towards infrastructure is that it not only reduces the logistics costs, it also is helping in reducing poverty. The rural economy is now better connected with the urban economy and is improving market access for the former,” said Rumki Majumdar, economist, Deloitte India.   

The railways and highways ministries are among the highest spenders, utilising 67 and 54 per cent, respectively, of the amount allocated in the Budget. 

 

Experts said while railway projects had been on target, there had been slippages in the highways sector. In the first four months of FY25, according to an ICRA report, there were awards for 563 km, 50 per cent lower than the 1,125 km in the similar period of FY24. 

The Centre is expected to relax cash-management guidelines for the last quarter (January-March) FY25 to allow lagging departments and ministries to utilise their allocation for the financial year. 

Continued capex contraction trend experts say, is likely to result in a shortfall of Rs 1-1.5 trillion in the capex target of Rs 11.1 trillion. There was a year-on-year decline of 15 per cent in capex utilisation in April-October FY25.   

The finance ministry is expected to relax norms for the release of interest-free capex loans to states to push utilisation.

“States are given funds based on their performance and many have been occupied due to elections. Finally there will be some slippages in targets but it will give elbow room to the government to manage the fiscal deficit,” said Madan Sabnavis, chief economist, Bank of Baroda. 

During April-November FY25 the Department of Telecommunications was able to utilise only 6 per cent of the budgeted capex as against 66 per cent in the same period last year. 

Pending capital infusion into Bharat Sanchar Nigam Ltd, for which the Budget has allocated Rs 82,916 crore, could have increased capex utilisation by the telecom ministry.