The Centre, states and central public sector enterprises (CPSEs) among them will likely spend Rs 7.5 lakh crore on capital investments in the second half of this fiscal, up 80 per cent over such expenditure in the first half, according to an analysis based on official projections and information gathered from different sources.
Overall spending, including revenue expenditure by the Centre and states will, however, rise only 15 per cent or thereabouts on-year to over Rs 33 lakh crore in H2. The expected surge in public capex in H2 would mean that a recovery in fixed investment rate that was visible in Q2 will gain further steam in the second half of FY21, giving a strong support to gross capital formation.
Fixed investments, for long in the doldrums, improved to report just 7.3 per cent decline on-year in Q2, compared with a record fall of 47 per cent seen in Q1; of course a favourable base (-3.9 per cent) aided the pick-up.
Chief Economic Adviser Krishnamurthy Subramanian had said the sharp narrowing of the contraction in gross fixed capital formation in Q2 from a record decline in Q1 was an “encouraging sign”, and noted the improvement was despite a slide in government spending in the second quarter.
As is known, the economy hasn’t received much government spending support in Q2 — government consumption expenditure fell 22 per cent on year. However, there have since been signs of improvement with the Centre’s Budget spending rising 9.5 per cent on-year in October, after a 26 per cent fall in September; also, budgetary capex was up 130 per cent on-year in the month, at Rs 31,519 crore.
However, states’ capital expenditure, or capex — estimated to have fallen sharply by about 40 per cent on-year to Rs 1.2 lakh crore in H1FY21 — may remain subdued in H2FY21 as well, mainly due to their revenue constraints. For the current fiscal as a whole, states’ capex performance may turn out to be one of the worst in recent years, with likely achievement of about Rs 3 lakh crore, or 46 per cent, of the budget target of Rs 6.5 lakh crore. It capex was about Rs 5 lakh crore, or 42 per cent of public capex, (Centre, states and CPSEs) in FY20. —FE
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