The government should target capital expenditure of Rs 11 lakh crore in the next fiscal year’s budget, while giving inflation-adjusted relief on personal income tax to boost consumer spending. Rating agency ICRA gave this advice to the government on Wednesday. According to PTI news, ICRA Chief Economist Aditi Nair said that the budgeted capital expenditure is likely to be about Rs 1.4 lakh crore less than last year’s record Rs 11.11 lakh crore. It is expected that the target for the next year should be set at the previous year’s level, with a focus on keeping borrowings within reasonable limits.
Between April and November 2024, capital expenditure stood at Rs 5.13 lakh crore
According to the report, Nair said that the capital expenditure numbers were lagging behind the run rate required to reach the budget target in the current financial year. Between April and November 2024, capital expenditure stood at Rs 5.13 lakh crore, which is 46 per cent of the budget estimate of Rs 11.11 lakh crore. Nair said that we are seeing a big shortfall in the current financial year. For the next year, we are hopeful that we will have fiscal space to prioritize capital expenditure. For FY26, a fiscal deficit of 4.5 per cent of GDP would be quite appropriately achieved based on the revenue numbers. This will allow us to do capex of Rs 11 trillion, which is 11-12 per cent higher than the viable number we think is feasible for FY25.
Government can adopt the path of supplementary demands
ICRA’s chief economist said it may not be prudent to keep capital expenditure numbers high as higher borrowing and fiscal deficit will push up yields. He said that realistic capital expenditure numbers should be kept in advance in the Budget for 2025-26 and if during the year it seems that it will be achieved more, the government can take the route of supplementary demands for grants to increase the target. Is.
To protect the economy from the impact of Covid, the government is spending heavily on creation of infrastructure and capital assets. It set capital expenditure at Rs 4.39 lakh crore in 2020-21, rising to Rs 5.54 lakh crore in 2021-22. Capital expenditure increased to Rs 7.5 lakh crore in 2022-23 and Rs 10 lakh crore in 2023-24.
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