India aims to achieve 60% of capex target by September to keep inflation at bay

The finance ministry has asked key infrastructure ministries and departments to speed up projects, setting a target of achieving at least 60% of the FY23 capital expenditure budget target by the end of September. North Block wants to push capital expenditure to support the economy buffeted by high inflation, geopolitical risk and monetary tightening.

"We aim to achieve about ₹4.45 lakh crore, which is 60% of the annual target, by the September quarter," a government official told ET, adding that infrastructure projects will be closely monitored to prevent any delays.

The government has budgeted ₹7.5 lakh crore capital expenditure in FY23, up from ₹ 6.02 lakh crore in FY22, in order to drive economic revival. Ministries and departments have been asked to provide detailed monthly plans and progress reports, giving specific reasons for delays in project implementation, said another official.


The department of expenditure will also closely monitor projects to ensure there is no wasteful spending as targets are pushed, the official said.

Monthly Review Meeting
"In every quarter, there will be a review meeting where it will be discussed and solved at its earliest," the official said.

The move seeks to address concerns that the capital budget may be slashed to provide for additional food and fertiliser subsidies as well as relief measures by the Centre to calm inflation, including duty cuts on petrol, diesel and edible oils besides key industrial inputs. The duty cuts add up to a revenue cost of about Rs 1.5 lakh crore.

Officials have maintained that even if the government is required to cut spending, it would rather cut revenue expenditure. Last month, finance secretary TV Somanathan told ET that the government will stick to the budgeted expenditure on capital, which is needed for the long-term growth of the economy. Experts said frontloading capex will help economic recovery, which is still vulnerable to global headwinds.

"Frontloading expenditure is a good move as it will help the economy and will also help it to tackle some of the global headwinds," said Crisil chief economist DK Joshi. "The Centre has increased subsidies, so they are increasing their overall spending to support growth." India's economic growth slumped to a four-quarter low of 4.1% in the January-March period.

Strong Start

In April 2023, the cumulative capital spending of all departments and ministries was Rs 78,925 crore, 67.5% more than the Rs 47,126 crore spent in the same month a year earlier. The highways and railways account for about Rs 58,500 crore of the Rs 78,925 crore spent on the capital account in April. The Ministry of Road Transport and Highways (MoRTH) has a capital expenditure budget of Rs 1.18 lakh crore in the current fiscal year. It spent Rs 40,318 crore in April, almost 21% of the annual target.

The Ministry of Railways spent ₹18,199 crore in April, which is 13% of its annual capital expenditure budget of ₹1.37 lakh crore. Last year in April, the rail ministry spent Rs 13,000 crore on the capital account.