Punjab government likely to miss capex target, only 32% achieved so far
Against a full-year capex of ₹10,354 crore envisaged in the budget, the state has spent ₹3,390 crore during the April-January period of the current fiscal, according to data on key economic indicators released recently. The capital expenditure incurred so far is 32.77% of the budgeted amount for FY24.
Despite a healthy growth in tax revenues and increased borrowing, the Punjab government is likely to miss its capital expenditure target going by the spending in the first ten months of the financial year 2023-24.
Against a full-year capex of ₹10,354 crore envisaged in the budget, the state has spent ₹3,390 crore during the April-January period of the current fiscal, according to data on key economic indicators released recently. The capital expenditure incurred so far is 32.77% of the budgeted amount for FY24. The share of capex is 3.5% of the government spending during this period.
A finance department official said that capex numbers will look much better by the end of the fiscal though they may still fall short of the target envisaged in the budget. “Government is pushing for capex-led growth now. There has been an improvement in capital expenditure compared to previous years,” said the official, who did not want to be named.
Capital expenditure, or capex, is the investment made by the government on the creation of assets that are long-term in nature, give a fillip to economic activity, and generate additional streams of revenue. Income-generating capital assets recover their costs over a period of time.
The state has fallen short of its capex targets repeatedly in the past five years. In 2022-23, the state government spent ₹6,720 crore compared to the capex of ₹10,981 crore announced in the budget estimates.
A Bank of Baroda (BoB) report studied the capital expenditure of 26 states till November 2023 and classified them into four groups. The report put Punjab at the bottom of the ladder along with Chhattisgarh, Nagaland and Mizoram, calling these states ‘laggards’ for slipping behind their capex targets. Telangana and Madhya Pradesh were listed as top states with 75% and 65% achievement of their targets for the year, respectively.
According to an analysis of Comptroller and Auditor General of India (CAG) data by the bank economists, out of ₹7 lakh crore of capex that was projected by these 26 states, ₹3.18 lakh crore was spent, which is around 45%, during this period.
“Clearly, there is a longer distance to be covered by these states. They (states) are more constrained by FRBM (fiscal responsibility and budget management) norms and could cut back on capex to ensure that the fiscal deficit targets are adhered to,” it said.
A Punjab economists also flagged the issue, stating that the state’s failure to achieve its capex targets year after year despite rising revenue expenditure and ever-increasing borrowings is a matter of serious concern.
Upinder Sawhney, professor of economics at Panjab University, Chandigarh, said that if capital expenditure declines or remains subdued, it means development expenditure is not increasing and revenue expenditure requirements are being met through borrowings. “The problem with every successive government in Punjab, irrespective of the party, since 1998 is that their populism has not only impacted capex but also led to accumulation of debt. The state will not be able to repay it till the time borrowings are utilised for income-generating assets,” she said.
The CAG, in its report on the finances of Punjab during the previous government, had also said that the government needs to use the borrowed funds as far as possible only to fund the capital expenditure and revenue expenditure should be met from revenue receipts. The state government has borrowed ₹29,094 crore in the April-Jan period this fiscal. At ₹25,578 crore, the state’s revenue deficit has already surpassed the budget estimates of ₹24,580 crore for the whole year. A revenue deficit means the government’s revenue expenditure is more than revenue receipts in a financial year. Of the revenue expenditure of ₹95,068 crore in the April-Jan period, 77%, has gone into meeting committed liabilities such as salary, pension and subsidy.
