Home / Economy / Centre’s capex up 63.4% so far in FY23: Economic Survey

New Delhi: The central government’s capital expenditure increased 63.4% year-on-year during the first eight months of the current fiscal (April-November), according to the Economic Survey for FY23.

During the same period last fiscal, the Centre’s capex stood at 2.7 lakh crore. The Survey said the growth in the government’s capex was a major driver of the Indian economy.

“The capital expenditure (capex) of the central government, which increased by 63.4% in the first eight months of FY23, was another growth driver of the Indian economy in the current year, crowding in the private capex since the January-March quarter of 2022. On current trend, it appears that the full year’s capital expenditure budget will be met," the Survey said

Apart from housing, construction activity, in general, has significantly risen in FY23 as the much-enlarged capital budget of the central government and its public sector enterprises is rapidly being deployed, it noted.

“Going by the capex multiplier estimated for the country, the economic output of the country is set to increase by at least four times the amount of capex," it said, adding that states, in aggregate, are also performing well with their capex plans.

Like the central government, states also have a larger capital budget supported by the centre’s grant-in-aid for capital works and an interest-free loan repayable over 50 years.

“The government’s capex-led growth strategy will enable India to keep the growth-interest rate differential positive, leading to a sustainable debt to GDP in the medium run," it said, indicating that the government’s focus on capex push would continue.

The Economic Survey presented by finance minister Nirmala Sitharaman in the Parliament on Tuesday also said that a sustained increase in private capex is imminent with the strengthening of the balance sheets of the corporates and the consequent increase in credit financing it has been able to generate.

It said that a “much-improved" financial health of well-capitalized public sector banks has positioned them better to increase the credit supply. Consequently, the credit growth to the micro, small, and medium enterprises (MSME) sector has been remarkably high, over 30.6%, on average during January-November 2022, supported by the extended Emergency Credit Linked Guarantee Scheme (ECLGS) of the Centre, it said.

The increase in the overall bank credit has also been influenced by the shift in borrower’s funding choices from volatile bond markets, where yields have increased, and external commercial borrowings, where interest and hedging costs have increased, towards banks.

It projected that if inflation declines in FY24 and if real cost of credit does not rise, then credit growth is likely to be brisk in FY24.

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