The government is set to invest in shorter-term projects to make the most of the record-high capital expenditure allocated in the interim budget for accelerating the country's infrastructure development, announced Finance Minister Nirmala Sitharaman.
"Normally, capital expenditure is earmarked for long or medium-term projects. This money is intended to create assets over a period of 24 to 36 months or even longer. However, we've stipulated that this money must be spent within 12 months. My assessment has shown that when capital expenditure is utilized within this timeframe, it leads to outstanding results. Hence, it is crucial to utilize it efficiently," stated the finance minister.
In the interim budget, the allocation for central capital expenditure has been increased by 11.11% (compared to the Budget Estimate for FY24) to Rs.11.11 trillion, aimed at advancing infrastructure projects in the upcoming fiscal year starting from 1st April. This move builds upon significant increases seen in recent years to stimulate economic growth. However, the rate of growth in capital expenditure for FY25 is slower compared to previous years, with a growth of 37% in FY24, 24% in FY23, and 40% in FY22.
Sitharaman clarified that the slower growth rate doesn't reflect a decrease in the implementing agencies' capacity but rather stems from the already elevated levels of capital expenditure, which would now see a proportional increase.
"In the past few years, capital expenditure has surged from Rs.3 trillion to Rs.10 trillion. Therefore, the growth on this higher base will be proportionate. An 11% increase on such a high base and a total of Rs.11 trillion is significant, constituting about 3.4% of GDP," explained the finance minister.
She also noted positive signs of increased private-sector investment in sectors like renewables, particularly those benefiting from productivity-linked incentive (PLI) schemes. However, she emphasized that sectors such as cement and traditional steel factories are yet to witness a similar surge in investments.
Furthermore, Sitharaman highlighted an uptick in capital expenditure by states, evidenced by the rise in central credit available to them under the 50-year interest-free special assistance scheme to Rs.1.3 trillion. She commended the progress made in the first two years of the scheme and anticipated its continued utilization by states to complete ongoing projects, especially those that have seen substantial progress with funds allocated by the central government over the past two years.
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