New Delhi: The government’s capital expenditure accelerated to 40.3% of the budget estimate till August even though it remained sluggish compared to the same period a year ago when capex stood at 44.1% of the budget estimate. Till July, capex was 31.8% of the budget estimate for 2019-20, mostly due to delayed expenditure on account of general elections during April-May period.
As per data released by Controller General of Accounts on Monday, the government exhausted 78.7% ( ₹5.54 lakh crore) of full year fiscal deficit target and 89.8% of the revenue deficit target for 2019-20. However, these numbers are set to substantially change by the year end.
In a big bonanza to corporate India, on 20 September, Sitharaman announced that manufacturing companies that are not availing tax sops can opt for a 22% corporate tax rate, while new manufacturing companies that register and start production between 1 October and March 2023 can avail of an even lower tax rate of 15%. The effective tax rate, including cess and surcharges, for the existing companies comes down from 34.94% to 25.17%, while for new companies it falls from 29.12% to 17.01%.
The impact on tax collections this year is expected to be 0.7% of GDP. Rating agency Fitch on Thursday said the decision to cut corporate tax rates may increase fiscal deficit by 40 basis points over the budget estimate of 3.3% of GDP for 2019-20. It added that the fiscal impact will be felt much earlier than the growth impact of the decision.
Signalling that there was no dearth of funds for public spending, finance minister Nirmala Sitharaman on Friday asked central government ministries to prepare their capital expenditure plans for the next four quarters and fast-track payments to various agencies to arrest the economic slowdown.
In a meeting of 21 major infrastructure departments, Sitharaman reviewed the progress in spending, and said the idea was to gear up the government machinery to spend the planned capital expenditure, instead of sitting over it.