India may marginally miss the revised target for capital expenditure (capex) for 2023-24, seemingly due to the slightly lower utilisation of infrastructure loans by states, and a slowdown in spending due to elections.
According to a government official, the capex figures are only close to the target of Rs 9.5 lakh crore for 2023-24.
In February 2024, the government's capex more than quadrupled on a year-on-year (YoY) basis and nearly doubled sequentially. With a spending of Rs 8.05 lakh crore during the first 11 months of the current fiscal, the Centre has met almost 85 percent of the revised target for FY24.
The official data detailing the capex figures for March is typically released around May-end.
The need to lower the initial Budget target for spending on infrastructure in FY24 was primarily attributed to lower-than-anticipated utilisation of capex loans by states.
While Rs 1.3 lakh crore had been budgeted for the Special Assistance as loan to states for the capex scheme for 2023-24, the revised estimate is Rs 1.06 lakh crore.
"We should be close to the revised capex loan target for states as well," the official told Moneycontrol.
Until February, loans and advances (which largely include capex loans given to states) was 88.7 percent of the revised estimates of FY24 -- at Rs 1.4 lakh crore. In fact, in FY23, loans and advances were much lower at 73.1 percent of the revised estimate of Rs 1.1 lakh crore.
This had sparked expectations that, unlike in FY23, states will be able to fully utilise the revised allocation for capex loans in 2023-24.
A potential marginal miss in meeting the targets for both capex as well states' capex loans can seemingly be tied to the country being in election mode for a while now, which typically leads to a slowdown in the pace of expenditure.
Back in March, ICRA's Chief Economist Aditi Nayar said that while there is an expense of around Rs 1.4 lakh crore left to be incurred in March 2024 to meet the full year target for capex in FY24, slightly lower than the Rs 1.5 trillion recorded in March FY2023, this may be missed, given the announcement of the model code of conduct (MCC) during that month.
To be sure, the MCC came into place only during mid-March, impacting only around 15 days of the previous fiscal year. The MCC is a set of guidelines that regulate political parties and candidates, prior to elections. The rules range from issues related to speeches, polling day, to announcing any policy, project or scheme.
Since the pandemic, the Centre has been focusing on boosting expenditure on infrastructure in a bid to improve the quality of public expenditure. In fact, the push towards capex is expected to continue in FY25, with the government allocating Rs 11.1 lakh crore under it. While this is an increase of 11.1 percent from the current year's budget estimate, it is 16.9 percent higher than the revised estimate.
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