RBI report shows states’ capital expenditure was budgeted to grow by 38.4% in FY 22-23, but actual spending registered a year-on-year growth of only 0.9% in Apr-Oct 2022.
States have seen stronger revenues and have been prudent with their expenditure, leading to better deficit ratios. But capex needs to increase & debt needs to reduce.
The government has planned Rs 7.5 trillion ($91.30 billion) in capital expenditure this year, the highest on record, to help crowd in private investment.
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.
States’ capital spending has slowed when compared to previous year. However, it's expected that Centre will provide them funds to spend on infrastructure by way of transfers.
The big capex push will not only create productive assets, but also more jobs. This, in turn, will create sustainable demand as well as crowd in private investment and push growth.
The FY23 fiscal policy appears to be guided by the objective of sustaining economic growth momentum while also being committed to gradual fiscal consolidation.
The Modi government has given a boost to capital expenditure and announced several infra projects to pump-prime private investment and economic recovery.
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