A bird’s eye view of the Centre’s capex efforts
3 min read . Updated: 06 Feb 2023, 12:57 AM IST
PremiumThe share of capex in the Centre’s total expenditure is slated to increase from 12.5% in 2019-20 to 22.2% in 2023-24
Even as the Centre allocates a greater share of its budget towards creating new assets, another story is playing out in another part of its sprawling empire. In the backdrop of challenging economic conditions, the set of 389 public sector undertakings (PSUs) owned and managed by the Centre are shrinking back on new investments. As a result, the primary government engine of capital expenditure is now the central government itself.
For 2023-24, the Centre has outlined a record capital spend of ₹10 trillion, an increase of 37% over 2022-23. But this is not its full capex envelope. The Centre also plans to transfer ₹3.7 trillion to states, scheme-implementing agencies and autonomous institutions for their own capex. And then, there are PSUs, which do their own capex. The three put together, or ‘overall central capex’, will be ₹18.6 trillion for 2023-24—a 28% increase over 2022-23.
Even with these hikes, overall central capex is still lower than pre-covid levels. What’s changing is the mix. The share of PSUs in overall capex has dropped from 3.9% of GDP in 2017-18 to 1.6% in 2023-24. Conversely, the share of direct spending by the Centre has increased from 1.7% to 3.3%.
That is a statement of intent. The share of capex in the Centre’s total expenditure is slated to increase from 12.5% in 2019-20 to 22.2% in 2023-24. It’s also the need of the hour—the flagging capex by PSUs is emblematic of weak private investments. The Centre hopes that doubling down on capex will help.
Rolling along
According to a post-budget report by analytics company Crisil, the biggest component of central government capex through this budget is directed at two infrastructure sectors: roads ( ₹2.6 trillion, year-on-year increase of 25%) and railways ( ₹2.4 trillion, 49%). While the railways capex growth looks impressive, there has been a significant shift in capex sources for the sector.
The share of so-called ‘extra budgetary resources’—essentially the railways’ own resources and what it can raise through market borrowings—used to finance capex has come down significantly. It is now budgeted to account for only 6.5% of the railways’ total capex in 2023-24, against 33% in 2022-23. Thus, almost all the railways’ capex in 2023-24 will come directly from the union budget. “The rise in allocation to railways will drive completion of dedicated freight corridors and national high-speed corridors, as well as infrastructure modernization," says the Crisil report.
Rural jobs blow
As mentioned earlier, apart from spending directly on capex, the central government also transfers resources for the creation of capital assets to states, and other agencies for implementation of schemes. The total transfer amount for 2023-24 is pegged at ₹3.7 trillion. The bulk of this is accounted for by transfers under 11 big-ticket schemes in sectors like rural employment (Mahatma Gandhi National Rural Employment Guarantee Scheme), water (Jal Jeevan Mission) and housing (Pradhan Mantri Awas Yojana).
While allocations under MGNREGS under the head of transfers for capital assets have dropped sharply by around 30% to ₹61,032 crore, allocations under other schemes have risen. These include Jal Jeevan Mission (up 27%), Pradhan Mantri Awas Yojana–Rural (13%) and Pradhan Mantri Awas Yojana–Urban (55%). The Reform Linked Distribution Scheme under the ministry of power and the Swachh Bharat Mission have both received big bumps in allocations, of 105% and 172%, respectively.
Food coffers
The other category beyond the main union budget is resources of public enterprises such as the Food Corporation of India, or oil companies. These account for 26% of the overall capex of the Centre. After a few years of falling sharply, this amount is budgeted to increase by ₹86,000 crore this year. However, the bulk of this increase is accounted for by just one enterprise, Food Corporation of India (FCI), whose resources are budgeted to increase by ₹90,000 crore in 2023-24.
Other PSUs whose resources are budgeted to increase are IREDA ( ₹10,174 crore), and Indian Oil Corporation ( ₹11,679 crore). However, increases in resources of these companies is offset by declines elsewhere, such as HUDCO (down by ₹2,868 crore), and specific railway enterprises such as Dedicated Freight Corridor Corporation (down by ₹3,000 crore).
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