India’s below-target capex spending, aided by states’ expenditure, is expected to pick up in the second half of the fiscal as the government looks for a multiplier effect to shore up the economy when global headwinds undermine growth.
The average capital spending till August is around Rs 50,000 crore a month against the budgeted Rs 62,500 crore, Aditi Nayar, chief economist with ICRA Ltd., told BQ Prime. “While the year-on-year growth in capex is very high, the average monthly outgo trails the amount required to meet the full-year capex.”
Until August, capital expenditure stood at 33.7% of the full-year budgeted target of Rs 7.5 lakh crore, according to the latest CGA data. The target includes 50-year interest-free loans to states worth Rs 1 lakh crore. Even adjusted for that, the target is higher than last year’s upwardly revised estimate of Rs 6.02 lakh crore.
Capital expenditure till August stood at Rs 2.52 lakh crore, with a slow pickup in the disbursals under the interest free capex loan for state governments, Nayar said.
But she expects the spending to pick up in the second half of the year on the back of states utilising the interest-free loans and the capex-led growth agenda of the government.
The government is quite focused on recovery through capex, Rajani Sinha, chief economist at CARE Ratings Ltd., told BQ Prime. “While they might cut on other expenditure, the focus remains on capex and in the next few months, we may see government capex recovery if the current global concerns permit.”