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‘The national elections haven’t slowed down the Centre’s capex plan in Q1’
- The capital allocation for infrastructure ministries has been scaled up substantially in the budget, allowing them to complete work under the Vision 2027 plan.
The plans for FY25 are on track, as per the announcements made in the vote on account budget, despite anticipation of muted government spending during April-June 2024 due to the ongoing general elections, a senior government official said.
"The Centre has not carried out any spending cuts during the Q1 FY25 (April-June 2024) period due to the general elections," the official said requesting anonymity.
Capital expenditure on infrastructure
The person added that the Union government's spending on large infrastructure projects hasn't slowed down due to the ongoing elections.
The interim budget, presented on 1 February, pegged a capex of ₹11.1 trillion for FY25, marking an increase from FY24's budgeted estimates of ₹10 trillion and revised estimates of ₹9.5 trillion.
Higher capex is largely proposed for infrastructure sectors such as roads, shipping and railways. The capital allocation for these ministries has also been scaled up substantially in the budget, allowing them to complete work under the Vision 2027 plan.
Capital spending by the government has been on the rise since the pandemic, even as private sector investment remained tepid.
Also Read: India's private capex not secular across industries, says HSBC's Malhotra
Although private sector investment gathered some momentum in the current fiscal, economists recommended doubling down on government capital spending to help steer the economy through any turbulence, including a feared global slowdown in 2024.
Presenting the budget proposals for FY25, the finance minister Nirmala Sitharaman said the capex outlay was 3.4% of GDP. The capex is almost 3.3 times that in FY20.
“The 11.1% growth may look lower than the previous four years but it is coming on the back of a higher base of last year. The Central capex was being provided to also trigger private sector investment and now we are seeing signs of private sector investment coming in," Sitharaman said during a post-budget press conference.
The infrastructure sector is set to become the biggest driver for the country that aspires to become a $5-trillion economy soon and a developed nation by 2047.
Bond buyback plans
Meanwhile, the Centre is also keen to maintain an optimum cash reserve, and it will evaluate plans to carry on more bond buybacks in coming months, the person mentioned above said.
"Buybacks help to save on interest costs," the official said.
Aslo Read | Infrastructure, capital goods yet to gain policy momentum
The Reserve Bank of India (RBI) recently announced that the Centre will buy back government securities (GS) worth ₹40,000 crore with the securities offered for buyback including the 6.18% GS 2024, 9.15% GS 2024 and 6.89% GS 2025, maturing on 4 November (2024), 14 November (2024), and 16 January (2025), respectively.
"Any further plans of bond buyback will be evaluated by the government in the coming months," the person added.
Bond buyback involves the Union government repaying a portion of its outstanding debt before the dates of actual maturity of its bonds.
Such buybacks also release liquidity into the banking system.
A finance ministry spokesperson has not yet responded to emailed queries.
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Business NewsIndustryInfrastructure‘The national elections haven’t slowed down the Centre’s capex plan in Q1’
First Published:12 May 2024, 06:55 PM IST
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