Centre to hike capital spend to boost growth

Defence, infra ministries will go on spending spree

The Centre on Thursday projected a 26 per cent increase in its capital expenditure in the next two years — a decision which hints that public investment would continue to anchor the economic growth of the country in the wake of lower private sector investment.

The capital expenditure — which means money spent to create an asset — will rise by 26 per cent from `3.09 lakh crore in current fiscal to `3.90 lakh crore in two years in 2019-20. The revenue expenditure — which in recurring nature — will rise by 19 per cent from `18.36 lakh crore in 2017- 18 to `22 lakh crore in 2019-20. With this, total expenditure of the central government is likely to touch `26 lakh crore in 2019-20, up from `21.46 lakh crore estimated for the current fiscal.

According to the Medium-term Expenditure Framework statement tabled in Parliament, capital expenditure will rise to `3.41 lakh crore in 2018-19 and revenue expenditure to `19.99 lakh crore in 2018-19.

The major items of capital expenditure for the government is defence (capital outlay).

At `86,488 crore, according to budget estimates (BE) 2017-18, this constitutes 28 per cent of the total capital expenditure of government. The capital outlay on defence is also anticipated to increase to `1,04,973 crore in 2019-20.

The next important components of capital expenditure is railways (`55,000 crore), road transport and highways (`54,177 crore), urban development (`19,332 crore) and department of financial services (`14,718 crore).

These five together constitute more than 74 per cent of all capital expenditure and are expected to crucial for boosting the economic growth by infusing public spending.

The private investment, which is one of the key elements that propels the economic growth, has been low owing to cautious attitude adopted by the companies and also poor financial situation of major infrastructure companies. In such a scenario, the responsibility to boost the economic growth by increasing public spending falls on the government.

The capital expenditure component in DFS is from bank capitalisation scheme that is operated by the department.

In the medium-term the capital expenditure on railways is projected to increase by `10,000 crore in 2018-19 and 2019-20 to reach a total of `75,000 crore in the terminal projection year. The railways are anticipated to focus both on safetyrelated aspects of capital expenditure and also on the opening of new lines in the medium term.

The expenditure by the road transport ministry is also projected to increase from current levels to a total of `70,000 crore in 2019-20.