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Informist, Sunday, Feb. 2, 2025

 

By Priyasmita Dutta and Sagar Sen

 

NEW DELHI - India's private sector will "eventually" have to play its role in making investments and the government will do its bit in encouraging the same, Manoj Govil, secretary in the finance ministry's Department of Expenditure, told Informist.

 

According to Govil, the government will "make regulations more investor-friendly and simplified". "We will also encourage private investment through public-private mode," he told Informist in a post-Budget interview on Sunday. "Eventually, the private sector also has to play its role in increasing the capital expenditure investment."

 

The Centre's capital expenditure rose sharply at the start of the decade as it chose to revive growth after the COVID-19 pandemic by pushing hard on investments. From 2020-21 (Apr-Mar) to 2023-24, the growth in capital expenditure was 30% on average every year before it slowed down to 17% as per the revised estimates for FY25. In the FY26 Budget presented on Saturday by Finance Minister Nirmala Sitharaman, the capital expenditure target for the upcoming financial year has been set at INR 11.21 trillion, not even 1% higher than the FY25 Budget estimate, which was revised lower by 8% to INR 10.18 trillion.

 

The slowdown in public investment in the current year has sparked concerns that it may have found its limits. Govil, however, said the government continues to push on capital expenditure and this is reflected in the "capital-focussed Budget", with provisional figures showing the figure for Apr-Jan was INR 300 billion higher from the same period last year.

 

January data on the government's finances will be released at the end of February. As per the latest data for Apr-Dec, the Centre's capital expenditure stood at INR 6.85 trillion, INR 117 billion or 1.7% higher on year.

 

Commenting on the slowdown in public investments in FY25, Govil said at the heart of the matter was "operational issues at the state government and local levels". To address the problem, the government has shifted focus on designing schemes based on more "accountability". Citing the Jal Jeevan Mission as an example--under which the government will now sign Memoranda of Understanding with states to implement the latest leg of the scheme better--the Centre has allocated INR 670 billion for the scheme for FY26, sharply higher than the revised figure of INR 227 billion for FY25.

 

The senior bureaucrat also said it is crucial that the Centre and states continue with "reform-based spending", with the INR 1.50 trillion rupees earmarked as long-term, interest-free loans to states in FY26 also "tied" to reforms. The modalities of the Special Assistance as Loan to States for Capital Expenditure scheme for FY26 are being worked out.  End

 

Edited by Vandana Hingorani

 

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