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The Ministry of Finance’s Expenditure Department has approved capital investment proposals of Rs. 56,415 crore for 16 states in the current financial year 2023-24, said a statement from the Ministry of Finance on Monday.
With the intent of availing higher multiplier effect of capital expenditure by charging expenditure by the states, the amount has been approved for 16 states including Arunachal Pradesh, Bihar, Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Mizoram, Odisha and Rajasthan. Sikkim, Tamil Nadu, Telangana and West Bengal.
The approval was granted under the scheme entitled “Special Assistance to Countries for Capital Investment 2023-24”. The scheme, which was announced in the 2023-24 budget in continuation of a similar push for capital expenditure from the last three years, is to provide special assistance to state governments in the form of a 50-year interest-free loan amounting to a total of Rs 1.3 crore during the 2023-24 financial year. .
The scheme has eight parts, with the first part being the largest with its own grant-like capital expenditure facility. In this part the amount was apportioned among the states in proportion to their share of central taxes and charges in accordance with the grants of the Fifteenth Finance Committee, while the other parts of the scheme are either linked to reforms or to sector-specific projects.
Continuous payment of capital expenditure or capital expenditure by the centre, especially for the states, is significant in view of the fact that several states, led by Andhra Pradesh, Maharashtra, Ube and Kerala, have failed to meet the target in terms of actual capital expenditures on various fronts despite getting the payments required by the central government in fiscal year 2023.
Last week, a Bank of Baroda report said that out of the data available for 25 states, 14 states achieved less than 75 per cent of the target in FY2023. A total of Rs 7.49 crore has been budgeted by these states. However, they spent just Rs 5.71 crore which is 76.2 per cent of the total. The center achieved its goal both in terms of actual capital expenditures in various fields as well as loans granted to countries that were to be used for capital expenditures. In FY23, the Centre’s capital expenditure exceeded the government’s revised estimate of Rs.7.28 crore by Rs.8,551 crore.
Loading up the initial funds for capital expenditures is important for countries this fiscal year as some of them head into elections later this year and before next year’s general election.
One expert said that countries require some certainty regarding their revenue stream to determine their expenditures, as revenue expenditures also make up a large part of their expenditures.
To increase resources for states to accelerate capital spending, the center also moved taxes forward to the first quarter of fiscal year 24 compared to prior releases in the second quarter of the previous year.
The center issued two installments of tax transfers totaling Rs. 1.18 crore for the month of June instead of the normal monthly transfer of Rs. 59,140 crore.
Government capital expenditure has been seen as the main driver of capital expenditure in the economy in the past few years.
This is because the private sector was not in a position to invest for various reasons. These range from low demand to overcapacity and high inflation.
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