Punjab government misses 2023-24 capex target by 53%

Punjab government missed its capital expenditure target by 53% in FY 2023-24, facing challenges in meeting revised goals due to pending central funds.

The Punjab government missed its capital expenditure (capex) target by 53% during the financial year 2023-24.

Against a capital expenditure of ₹10,354 crore proposed in budget estimates (BE), the state government spent only ₹4,862 crore during the financial year, leaving a gap of ₹5,492 crore, according to the latest data on key economic indicators

Against a capital expenditure of ₹10,354 crore proposed in budget estimates (BE), the state government spent only ₹4,862 crore during the financial year, leaving a gap of ₹5,492 crore, according to the latest data on key economic indicators. 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 capex target was reduced to ₹6,406 crore in revised estimates (RE) 2023-24 in January this year from BE of ₹10,354 crore. The state government was, however, not able to meet even the revised target, missing it by a wide margin of 25%. The share of capex was approximately 3% of the government expenditure during the previous fiscal. A finance department official claimed that the government was serious about capex-led growth, but its efforts were hampered due to funds pending with the central government. In its budget for 2024-25, the state government has proposed capex of ₹7,445 crore.

The state has repeatedly fallen short of its budgeted capital expenditure in the past five years. In 2022-23, the present government spent ₹6,720 crore compared to the capex of ₹10,981 crore announced in the budget estimates for the financial year. 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 them ‘laggards’ for slipping behind capex envisaged in their approved budgets, while Telangana and Madhya Pradesh were listed as top states with 75% and 65% achievement of their targets for the year. Though Punjab showed some improvement in capital spending in subsequent months, it was still not enough to meet the revised target.

Punjab economists view the state’s inability to achieve its capex targets year after year despite increasing revenue expenditure and borrowings with serious concern. The CAG, in its report on the finances of Punjab during the previous government, 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.