The Centre has made the decision to frontload capital investment (capex) and finish 80% of the intended spend by the end of December in advance of the general elections held the following year.
While some ministries are now underperforming and will need to ramp up the pace, others are currently going and have spent up to 45–46% of their full-year budget. In reality, the decision to increase spending during the first nine months of the fiscal year is being made at PM Narendra Modi’s request.
The finance ministry typically requests that ministries spend two-thirds of the funds allotted by the end of December, with the remaining funds being used up from January to March. When the finance minister gives the updated estimates for the entire year, ministries that are performing poorly frequently get their budgets cut, while some of the better-performing ministries receive additional funding.
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Government’s Capex increased in April:
According to data held by the finance ministry, the Center’s capex increased by 55% between April and June of this year, reaching almost Rs 2.7 lakh crore, with more than 27% of the budgeted amount already being used for this purpose.
Despite a significant 25% increase in spending on capex during the first quarter of the financial year, central public sector undertakings are considered as behind because they have only used up about 10% of the internal and extra budgetary resources (IEBR) available for the year.
Since higher interest rates and weak export market demand have caused the private sector to postpone its planned investment in building new capacities or expanding existing plants, it is believed that increased spending by the government and public sector organizations is essential to maintain the growth momentum. Weaker domestic demand, which the RBI believes has been harmed by rising interest rates, has contributed to the delay.
The administration will be able to finish a number of its projects in time for the elections and highlight them as a success if the expenditures are frontloaded.
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