The Free Press Journal

Discrepanc­ies in capex numbers in Budget

- Teji Mandi( TM Investment Technologi­es Pvt. Ltd .) is a SE BI registered investmen t advisor. No informatio­n in this article should not be construed as investment advice. Please visit www.tejimandi.com to know more.

One of the most appreciate­d features of the Union Budget 2021–22 is the improved focus on expenditur­e. The government has revised its capital expenditur­e estimates from Rs 3.4 lakh crore in FY20 to Rs 4.4 lakh crore in FY21. It has further expanded the budget estimates for FY22 to Rs 5.5 lakh crore, implying a massive growth of 65% YoY over two years.

However, af ter making necessar y adjustment­s, few discrepanc­ies have emerged on this account. A few points mentioned here reveals that fresh capital expenditur­e is not as significan­t. And, many of them are even carried forward from the last budget.

Extensive focus on loans and advances

:

There are two components to the government spending: 1) capital outlays and 2) Loans and advances (L&A).

Capital outlays is the actual investment spending by the central government while in L&A, funds will be disbursed by banks and other financial institutio­ns. In budget FY21, L&A portion is pegged much higher at 24% of capex as against the normal range of 7-9%. It implies that actual spending via capital outlays grew by just 6.7% in FY21. It was lower from 11% growth in FY20.

In a nutshell, most of the capital expenditur­es in FY21 were carried in form of loans through banks and financial institutio­ns. In reality, the government's actual participat­ion through capital outlays

The adjustment­s in FY22:

The budget has expanded the scope of capital expenses to Rs 5.5 lakh crore in FY22 from Rs 4.4 lakh crore in FY21. However, the adjustment­s in capital outlay and CPSEs will bring the investment expectatio­n down drasticall­y.

The government has budgeted for Rs 20,400 crore capital infusion in BSNL/MTNL for the 4G spectrum. However, this is not a fresh allocation. The fund was allotted in FY21 but it could not be utilized. Hence, it is pushed to FY22. Therefore, this amount should not be classified as fresh spending.

Apart from this, one adjustment is to be made in CPSEs’ capital outlays. In FY21, Food Corporatio­n of India’s (FCI) capital outlays were pegged at Rs 1.15 lakh crore. FCI's budgetary estimate for FY22 is pegged at Rs 1.02 lakh crore. FCI's expenditur­es in the past have been on account of giving food subsidies. Considerin­g the expense pattern to remain similar, budgetary allocation for FY22 should also be excluded from the government's capital expenditur­e plan.

After assessing the finer details and decoding the capital expenditur­e allocation­s, combined capital outlays are estimated to grow 6.6% in fiscal 2021, marginally lower than 7.2% in fiscal 2020

Closing comments:

Af ter assessing the finer details and decoding the capital expenditur­e allocation­s, combined capital outlays are estimated to grow 6.6% in FY21, marginally lower than 7.2% in FY20.

For FY22, capital outlays are expected to grow 35% YoY. But, CPSEs’ investment­s are expected to decline by ~3%. It brings down the combined capex growth at 12.3% for that year. This implies the average capital expenditur­e growth of only ~9.5% for FY21 and FY22.

stands reduced.

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