FM seeks to kick-start public capex cycle in bid to revive economy2 min read . Updated: 27 Sep 2019, 11:32 PM IST
- The FM reviewed the progress in spending in a meeting of 21 infra departments
- On Saturday, Sitharaman will chair another meeting of heads of CPSEs
New Delhi: 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. “My intention is to clear the pending dues with any of the ministries to goods and services providers by the first week of October. No non-litigating dues should be kept pending," she said. Out of the ₹60,000 crore of government procurements, payments of ₹20,000 crore are pending.
Indian businesses have been battling a demand slowdown and liquidity crunch, which resulted in the economic growth rate plummeting to a six-year-low of 5% in the June quarter, while private consumption expenditure was at an 18-quarter-low of 3.1%.
On Saturday, Sitharaman will chair another meeting with heads of central public sector enterprises.
Out of the central government’s total expenditure of ₹27.86 trillion for 2019-20, capital expenditure is budgeted at ₹3.38 trillion. Total expenditure in April-July grew by 6.5%, compared to the 10.1% in April-July FY19, due to a contraction in capital expenditure, according to controller general of accounts estimates.
Expenditure secretary Girish Chandra Murmu said departments have spent around 50% of their capital expenditure target till August. “Entire capital expenditure is on track so that investment in economy comes, and that much liquidity is pumped into the market. All departments have geared up, except where some land issues are there. Monthly expenditures will be monitored," he added.
Asked how she plans to meet the fiscal deficit target of 3.3% of gross domestic product for 2019-20 if she does not reduce government spending, Sitharaman said at this stage, she was only looking at getting expenditure going. As the time approaches, “I will obviously have to look at reconciling budget commitments with regard to fiscal deficit near the fiscal year-end," she added.
On 22 September, Sitharaman had ruled out an immediate reduction in spending to balance this year’s budget, despite fears of fiscal slippage due to the sharp cut in corporate tax rates.
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.
Regarding arbitration awards in contractual disputes by government and PSUs, Sitharaman said banks were still seeking guarantees despite the Centre’s decision on 23 August to pay 75% of the dues upfront, provided arbitration was in favour of the claimant. “More work has to be done with the RBI. I am following it up," she added.
Shreya Nandi contributed to this story