States Must Step Up Capex, Invest More in Rural Areas: Fin Secy
New Delhi : The Centre has nudged states to enhance capital expenditure and invest more in rural areas and infrastructure. “States are requested to align their focus to the thrust provided in the Union Budget to promote investment and growth in the rural sector...It is imperative to step up capital expenditure at state level also,” finance secretary Ratan Watal said on Monday.
Addressing the second conference of state finance secretaries in Delhi, Watal said the Centre has accepted the recommendations of 14th Finance Commission and that will give more funds and greater autonomy to states.
“Total transfers to states including grants in aid from Centre to states are estimated to be .₹ 9.47 lakh crore in 2016-17 as compared to .₹ 8.36 lakh crore during 201516, which is a hike of 12% of revised estimates of 2015-16,” Watal said.
He said the Centre has also approved an additional fiscal deficit to eligible states during the remaining period of the award from 2016-17 to borrow more under the two flexibility options.
“The states will get additional space to raise borrowings, which may result in much-needed government expenditure for capital projects and infrastructure,” Watal said. The union cabinet last week allowed states with sound finances to borrow an additional 0.5% of their GDP over and above the 3% prescribed by the 14th Finance Commission to help them meet developmental needs. Watal said prudent expenditure management by exploring the possibility of rationalising subsidies, certain state subsidies and grants can help states maintain revenue balance so that capex can be increased.
“To give further impetus to public investment and infrastructure, it has been decided to give additional resources of .₹ 31,300 crore through issuance of bonds, by CPSEs (central public sector enterprises) and ministries like (those of) power, renewable energy, shipping, agriculture,” he said. Watal said to ensure macroeconomic stability and prudent fiscal management, the Centre has stuck to the fiscal deficit target of 3.5% in 2016-17.
“The global economy is still struggling and it may take some time for it to stabilise. Economic shocks elsewhere in the world are felt in the domestic markets. Despite the sluggish scenario, the Indian economy has shown steady improvements in the recent periods,” he said.
Rating agencies globally have estimated that India will be the engine of global growth, Watal said.
Watal said Centre has accepted the proposals of 14th Finance Commission that will give more funds & autonomy to states