Growth in capital expenditure higher than overall budget size, says Expenditure Secretary Manoj Govil

Last year (FY24), our actual capex was ₹9.49 lakh crore, which increased to ₹11.11 lakh crore in the Budget of FY25. In the current financial year, because of elections and other political activities in the first quarter or may be four months, the expenditure was quite low. In fact, the Economic Survey does some analysis about capital expenditure in the first four months and how it picked up subsequently. Out of ₹11.11 lakh crore, the current estimate that we have put as revised in the Budget is ₹10.18 lakh crore, which will be around 7 per cent growth over ₹9.49 lakh crore; so the capital expenditure is growing. And if it were not for the election process, which reduced the pace of expenditure, then this could have been even better.

Even now, the actual outcome might be slightly more than ₹10.18 lakh crore, but that is an estimate we have put in as the most probable estimate for this year. Now, if you see the next year, the total amount of capital spending is actually slated to go up to ₹11.21 lakh crore which is around a 10 per cent growth, which is reasonable growth. You also have to compare this 10 per cent to the overall growth in the Budget size, which is around 7 per cent from RE of ₹47.16 lakh crore to be for the next year of ₹50.65 lakh crore. So as a component of the overall expenditure, we are focusing more on the capital expenditure as compared to other parts of the Budget. That is one part. The second part is that capital expenditure happens in two ways. One is this direct capital expenditure by the Central government agencies. The other is when we give money as grants for capex to State governments, which also results in capital expenditure. If you also count that in the current year, the RE estimate for capex, plus grants for capex both together is ₹13.18 lakh crore. That is the RE figure, which is slated to go up to ₹15.48 lakh crore in the Budget estimate for FY26. That means a 17.4 per cent increase. Now imagine the overall Budget size is increasing 7.4 per cent between RE and BE, whereas capex, both direct as well as grants for capex, aggregate is increasing 17.4 per cent for the same period. So, if you take that into account, it is fair to say that the focus on capex has been maintained for the next year as well.

We have a scheme called 50 years interest-free loan scheme in which last year, the aggregate spending was ₹1.09 lakh crore against BE of ₹1.5 lakh crore. This fiscal also, the Budget estimate was ₹1.5 lakh crore but we have the preliminary figures for January-end, and those figures indicate that by January-end in this financial year, we have almost reached that figure of ₹1.09 lakh crore and we have two months more to go. So the revised estimate for that scheme in the current financial year is ₹1.25 lakh crore; ₹1.25 lakh crore is obviously better than ₹1.09 lakh crore. So, the capacity and actual utilisation has increased. It might pick up even more in the last two months of the current fiscal and be even more than ₹1.25 lakh crore.

The circular for ₹1.5 lakh crore scheme has not been issued yet. In fact, the France Minister announced it in the Budget only on Saturday. Now we will consult with the concerned ministries and decide upon the circular to be issued for the next financial year. But it is safe to say that, as in the present year, the circular for the next year also will have a portion which is untied and a portion which is based on the various reform activities carried out by the State governments. Now the 0.5 per cent additional borrowing based for the power sector reform, is a separate item that is based on the borrowing permission, which is given to the various State governments to borrow from the RBI or otherwise now that dispensation was available till the current year which will now be also available for the next financial year.

For the current fiscal, the untied part was ₹55,000 crore and ₹95,000 crore was the tied part. As I said, for the next financial year, we still have to finalise the circular so we it is not fair to say what the ratio would be. But there will be two components.

The focus has been on the Railways as well as roadways as well as defence. These three are the main departments or areas where most of the capex is allocated. This was the case in the current financial year and in the next financial year also, that has been maintained. The position of these have been maintained, and they will get a substantial portion of the overall capex.

The actual number for allocation depends on various factors — the number of sanctions that they have obtained from the competent authority for various projects; the number of projects in their pipeline; the record of executing the works; and, of course, the overall availability of funds. As I said, the good thing is that the overall allocation has not come down for these departments and the focus has been maintained. For example, if allocation for the Railways had become less, then one could argue that the focus has been lost. But that is not the case. That has been maintained at the level it is. In defence, of course, the allocation has been increased by around ₹22,000 crore.

Overall FY26 subsidies for fertilizers is very close to the number that we have for the revised estimate this year. If you see overall, the subsidies for food, fertilizer, petroleum, etc, the actual figure for FY23 is ₹4.35 lakh crore. For this year, it is ₹4.28 lakh crore and for the next year, it is ₹4.26 lakh crore. So it’s very close. There is not much change in subsidy, but the subsidy allocation or budget also depends on the way the prices move. Should the prices of, let us say, petroleum products were to go down in international market, then the subsidy allocation or subsidy expenditure will come down. Similarly, if the prices go up, the subsidy expenditure may go up.