NEW DELHI: The central public sector enterprises (CPSEs) and other government agencies like the NHAI and the Railways have invested Rs 5.51 trillion or 75% of their combined FY24 capital expenditure target in April-December period.
On an annual basis, these entities’ capex grew by robust 22.4% in the first nine months of the current financial year. The corresponding growth in the year-ago period was 19.3%.
The capex target for the CPSEs and other agencies was set at Rs 7.33 trillion for FY24 as against Rs 6.62 trillion in FY23. The data pertains to select CPSEs having annual capex target of Rs 100 crore and above as well as other government organization.
Thanks to robust public capex, investment demand grew by 11% in the second quarter compared with 8% growth in the first quarter of FY24. The investment rate (GFCF as % of GDP) also inched higher to 35.3% compared with 34.2% a year ago.
This was supported by higher capital expenditure at both the Central and state government levels as well as state-run entities/agencies. As against the target of Rs 10 trillion, the Centre’s capex has reached 58.5% in April-November of FY24.
Capital expenditure by state governments surged by 56% on year in the first half of the current financial year compared with just a 2% rise in the year-ago period, supported by capex loans from the Centre.
Railways and NHAI with substantial budgetary support as well as petroleum CPSEs are the largest public-sector investors that play a key catalytic role in crowding capex from other entities.
Capex of Railways estimated to be Rs 2.6 trillion and NHAI’s at Rs 1.62 trillion are almost fully funded from the Budget in FY24. The advance estimates of national income for FY24 released by the National Statistical Office recently showed that gross fixed capital formation would rise to close to 35% of the GDP from 34% in FY23 and 32.7% in FY22. This reflected the continued momentum in public capex, and a moderate revival of the private capex cycle.
However, there are questions about whether the Centre can continue with the same capex pace in FY25, given the urgency of fiscal consolidation. Some analysts feel the Centre’s budget capex for the current fiscal year may be missed by small to significant margins as the spending might slow ahead of the approaching Parliament elections.
Buoyant tax collections are what the government pins hopes on, when it comes to sticking to the glide path of fiscal consolidation.
Source: The Financial Express
