Government Faces Capital Expenditure Hurdle to Achieve Year-End Targets

The central government must increase capital expenditure by 41 per cent in the remaining months of the fiscal year to meet growth targets. Experts highlight a 19.5 per cent contraction in the first five months, stressing the need for proactive fiscal management to spur economic expansion.

The central government is under pressure to escalate its capital expenditure spending by 41 per cent in the remaining months of this fiscal year to meet projected growth targets. Experts highlight a 19.5 per cent contraction in government capital expenditure from April to August.

DK Srivastava, Chief Policy Advisor at EY India, analyzed the CGA data released on Monday, emphasizing that to meet an annual capital expenditure growth target of 17.1 per cent by 2024-25, the government must ramp up its efforts. He cited the critical role of government infrastructure spending in driving domestic demand and economic growth.

Srivastava added, "To ensure the continuation of India's impressive annual growth rate of 7 per cent or more, the Government of India needs to proactively accelerate its capital expenditures." Concurrently, the Reserve Bank of India's fiscal data for April-June 2024-25 indicated key trends, including a widened Current Account Deficit (CAD) to USD 9.7 billion.

According to the data, India's CAD was 1.1 per cent of GDP in Q1 FY25, up from 1.0 per cent in Q1 2023-24. The merchandise trade deficit also grew to USD 65.1 billion in Q1 2024-25 from USD 56.7 billion in the same quarter last year.

Commenting on the fiscal deficit figures for April to August 2024, Manoranjan Sharma, Chief Economist at Infomerics Ratings, noted it stood at Rs. 4.35 lakh crore, constituting only 27 per cent of budgetary estimates, an improvement from the previous year's 36 per cent. He stressed the importance of narrowing the fiscal deficit to 4.9 per cent of GDP in FY25, from 5.6 per cent in FY24.

(With inputs from agencies.)