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Modi govt pushes ministries to boost capex to help India get into top 3 global economies

Govt ministries & depts told to increase pace of capital spending to boost growth & help create more jobs. Push comes at a time of high retail inflation & rising global interest rates.

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New Delhi: The Centre has yet again directed its ministries and departments to increase the pace of capital spending to not only boost growth but also help create more jobs, ThePrint has learnt — a development that comes at a time when states’ capex has slowed.  

The directions on capital spending came from Cabinet Secretary Rajiv Gauba in a review meeting he chaired on 12 August to discuss the preparation of Vision India 2047 — a plan to bring India among the top three global economies and inch closer to the status of a developed nation by the 100th year of its Independence.

According to the minutes of the review meeting accessed by ThePrint, Gauba asked ministries and departments ”to step-up capital expenditure and monitor it to ensure that expenditure incurred is [according to] the requirement projected”. 

Capital expenditure is the money that the government spends for long term-asset creation.  It could be investing in machinery, buildings, healthcare, and infrastructure, among other things.

Budget 2022-23 shows that the central government is projected to spend a record Rs 7.5 lakh crore in capital creation in the financial year 2022-23. Out of this, Rs 1 lakh crore is kept aside as assistance that will be given to states in the form of 50-year interest-free loans to fund the capital expenditure plans. 

Until July, the Modi government had spent Rs 2,08,670 crore on capital expenditure — a jump of 62.5 per cent from the Rs 1,28,428 spent in April-July 2021 — according to the Controller General of Accounts (CGA), the central government’s principal adviser on accounting matters.

Keeping aside the interest-free loans to states, the central government will have to spend Rs 55,000 crore on average in the next eight months to meet the capex target. 

The government’s push on capital spending comes when the retail inflation remains elevated (6.7 per cent in July) and rising global interest rates, which have pushed the Reserve Bank of India (RBI) to hike interest rates in order to suppress demand.

But such a push has also led the gross fixed capital formation — a proxy for investment levels in the economy — to register a healthy growth of 20.1 per cent in the first quarter of 2022-23 over the same period last year.  

Data with the CGA shows that the ministries of road transport and highways and railways have witnessed healthy growth in capital spending in April-July, with capital expenditure by the two ministries jumping over 40 per cent till July.


Also Read: Increase capital spending, Centre tells states, Sitharaman to meet state FMs next week


Resolve pending matters through ‘Special Campaign’

It was also decided in the meeting that all ministries and departments need to focus on the disposal of pending matters during the ‘Special Campaign’  — the central government’s initiative to dispose of any pending matters before it to be scheduled from 2 October to 31 October this year.

“A few hours may be set aside every week for [the] disposal of such matters. Monitoring of pendency to be done on a regular basis,” the minutes of the meeting said.

The ministries and the departments have also been told to immediately review the observations contained in the CAG report tabled in Parliament earlier this year and take corrective/remedial actions. 

“Officers at all levels to be sensitised about the importance of CAG’s observations so that systemic improvements are carried out in a time-bound manner,” the minutes stated.

Directions were also issued to take prompt action to fill up direct recruitment vacancies, fill up posts on promotion, and vacancies anticipated on account of superannuation in various ministries and government departments.

In the meeting, the cabinet secretary also highlighted Prime Minister Narendra Modi’s Independence Day address about what India should aspire for in the next 25 years.

According to a senior government official, the secretary of agriculture and farmers’ welfare stressed the need to “re-organise the ministry” and the “change” required in its outlook. “He observed that it is necessary to shift focus from production towards value chain creation, with the government playing the role of a facilitator,” the senior official told ThePrint.

(Edited by Uttara Ramaswamy)


Also Read: Modi govt ‘assures timely transfer of capex funds’ as states decry reduced borrowing capacity


 

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