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Govt hikes capital expenditure by 34.5%

By, New Delhi
Feb 02, 2021 01:55 AM IST

Finance minister Nirmala Sitharaman on Monday raised the government’s capital expenditure by 34

Finance minister Nirmala Sitharaman on Monday raised the government’s capital expenditure by 34.5% to 5.54 lakh crore in 2021-22 compared to 4.12 lakh crore budget estimate (BE) for 2020-21.

“Over and above this expenditure, we would also be providing more than <span class='webrupee'>₹</span>2 lakh crores to States and Autonomous Bodies for their Capital Expenditure,” Nirmala Sitharaman said.(HT Photo)
“Over and above this expenditure, we would also be providing more than 2 lakh crores to States and Autonomous Bodies for their Capital Expenditure,” Nirmala Sitharaman said.(HT Photo)

“In the BE 2020-21, we had provided 4.12 lakh crores for capital expenditure. It was our effort that in spite of resource crunch, we should spend more on capital and we are likely to end the year at around 4.39 lakh crores, which I have provided in the RE (revised estimate) 2020-21,” she said in her Budget speech.

She said that the Union government would also work out “specific mechanisms to nudge” states to spend more of their Budget on creation of infrastructure.

Out of the 5.54 lakh crore capital expenditure allocation, a sum of over 44,000 crore have been kept under the budget head of the department of economic affairs (DEA). This fund can be accessed by such projects or departments that would exhibit good progress on capital expenditure and need more financial support, she said. DEA is an arm of the Union finance ministry.

“Over and above this expenditure, we would also be providing more than 2 lakh crores to States and Autonomous Bodies for their Capital Expenditure,” she said.

Experts said the capital expenditure plan will create assets such as economic corridors, highways and railways projects, which will spur growth and create jobs.

Vivek Agarwal, partner — infrastructure, government and health care practice, KPMG in India, said: “The government’s focus on restarting economy is clear in its commitment to the time-tested Keynesian principle of spurring infrastructure to create jobs and channelize economy multiplier cycles.”

With a 5.54 lakh capital expenditure, there is a huge focus on strengthening infrastructure through industrial corridors, highways, BRT, railways, ports and power, especially with the highest-ever allocation to the ministry of road transportation and highways, he added.

Also read: New-found confidence about India reflects in a bold budget

The government has already announced a 111-lakh crore National Infrastructure Pipeline (NIP), which would require investments.

“The National Infrastructure Pipeline (NIP), which I announced in December 2019 is the first-of-its-kind, whole-of-government exercise ever undertaken by Government of India. The NIP was launched with 6,835 projects; the project pipeline has now expanded to 7,400 projects. Around 217 projects worth 1.10 lakh crores under some key infrastructure ministries have been completed,” Sitharaman said.

The finance said the budget was taking three concrete steps to meet the ambitious target — by creating the institutional structures, by giving a big thrust on monetising assets, and by enhancing the share of capital expenditure in central and state budgets. “The NIP is a specific target which this government is committed to achieving over the coming years. It will require a major increase in funding both from the government and the financial sector,” she said.

In order to achieve the target, Sitharaman proposed to create a professionally managed Development Financial Institution (DFI) to meet long-term debt financing needs of infrastructure projects.

She unveiled the government’s multi-crore plan to augment road infrastructure and economic corridors (such as a 3,500-km national highway (NH) project in Tamil Nadu with an investment of 1.03 lakh crores; 1,100 km of national highway works in Kerala with an investment of 65,000 crore; 675km of highway works in West Bengal with an investment of 25,000 crore, and national highway works of around 34,000 crore covering over 1,300 km in Assam).

West Bengal finance minister Amit Mitra, however, called it an electoral gimmick. “The budget announced construction of roads in states going for elections, is there any motive behind it? Why not other states? It announced road projects of 625km in West Bengal, but the state government has already constructed 88,841km of rural roads in 10 years, which has been recognised by the Government of India. Besides the state government has also constructed 5,111 kms of highways and other state roads. About 1,165 km road projects are currently under construction.”

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