Govt projects a 26% capex rise over 2 yrs

The government has projected its revenue spending to go up 20 per cent, and capital spending nearly 26 per cent from 2017-18 to 201920, with an increase in the overall expenditure forecast at 21 per cent, according to the finance ministry’s Medium-term Expenditure Framework tabled in Parliament on Thursday.

The framework forecasts a revenue spending of ~20 lakh crore in 2018-19 and ~22.05 lakh crore in 2019-20, compared to the budgeted estimates of ~18.37 lakh crore for 2017-18.

Capital expenditure (capex) is forecast at ~3.41 lakh crore for 2018-19 and ~3.9 lakh crore in 2019-20 compared to nearly ~3.1 lakh crore budgeted for 2017-18. Total expenditure is expected to rise to ~23.4 lakh crore in 2018-19, and ~25.95 lakh crore in 2019-20, compared to ~21.46 lakh crore budgeted for 2017-18.

The projected increase in capex indicates that the Centre expects public spending in infrastructure to be the driving force of the economy. This means that in accordance with its expectations, private sector spending will remain muted even as the government and the Reserve Bank of India work to clean up the toxic assets in the banking system.

The Centre estimates nominal gross domestic product (GDP) growth of 12.3 per cent for 2018-19 and 2019-20, and reiterated its fiscal and revenue deficit targets for the next two years. It sees a fiscal deficit target of 3 per cent of GDP each for 2018-19 and 2019-20, and a revenue deficit of 1.6 per cent and 1.4 per cent for the two years. For 2017-18, nominal GDP growth has been forecast at 11.75 per cent, and the fiscal and revenue deficits are budgeted at 3.2 per cent and 1.9 per cent, respectively. The fiscal deficit road map till 2019-20 is the one which the fiscal responsibility and budget management committee has recommended in its report to the government.

Revenue expenditure in defence, excluding salaries and pensions, is expected to grow by about 10.4 per cent in 2018-19 and 8.5 per cent in 2019-20, the framework document has stated. In terms of capital spending, mainly to buy new weapons and equipment, defence will see spending rise from ~91,580 crore in the current fiscal to ~1.01 lakh crore in 2018-19 and ~1.12 lakh crore in 2019-20.

Capex on railways is projected to increase by ~10,000 crore in 2018-19 and 2019-20 to reach ~75,000 crore, according to the document.

The fertiliser subsidy outlay is projected to be flat at ~70,000 crore between the current fiscal year and 2019-20. The food subsidy bill will rise to ~1.75 lakh crore in 2018-19 and ~2 lakh crore in 2019-20, compared to the 2017-18 budgeted estimates of ~1.45 lakh crore.

However, petroleum subsidy is expected to drop sharply to ~10,000 crore in 2019-20 and ~18,000 crore in 2018-19 from ~25,000 crore in the current fiscal year. “In continuation (with) the efforts of the government to rationalise subsidies, the government has decided to increase the cost of LPG cylinders by ~4 per month. The ultimate aim of the government is to eliminate the subsidy on LPG cylinders by end-March 2018,” the document said.

On the revenue front, the document said that the introduction of the goods and services tax, as well as the increased surveillance after demonetisation, will expand the tax base in the next two fiscal years.