Government's capex has picked up momentum again in JanuaryCanva
Capex has gained momentum once again in January – after a slump in December – growing 60% year-on-year to ₹79,948 crore.
The total capex for FY23 has touched 78% of the total revised estimate of ₹7.28 lakh crore, as against 73% in the same period last year.
Government’s capex in FY23 has also been higher every month when compared to the same period in FY22.
According to government data, the fiscal deficit at the end of January FY23 stood at ₹11.9 lakh crore, or 67.8% of the full-year budget estimates.
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The Indian government’s capital expenditure (capex) witnessed a rebound in January after slumping in December, crossing 78% of the total revised estimates for FY23. Capex jumped 60% year-on-year in January to ₹79,948 crore, taking the government’s total capex so far this fiscal year to ₹5.7 lakh crore.
Capex momentum took a pause in December, marking the first month of decline in FY23 so far. According to data released by the Ministry of Finance, capex slumped 63.7% YoY in December to ₹42,831 crore.
According to available data, the government is still nearly 22%, or ₹1.58 lakh crore, shy of hitting its capex target of ₹7.28 lakh crore for FY23.
Despite the December slump, capex trends during FY23 have pointed at more proactive spending by the government – its spends every month this year so far have been higher as a percentage of the budget for the entire year.
“On the current trend, it appears that the full-year's capex (announced in the Budget) will be met,” the government had said in its Economic Survey 2022-23 earlier in January.
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On an average, the government has spent 29% more in capex in the first ten months of FY23 at ₹56,989 crore per month when compared to the same period in FY22, at ₹44,169 crore per month.
For FY24, the government has set a 33% higher target for capex at ₹10 lakh crore. Higher capex allocation and a resilient economy has pushed global credit rating agency Moody’s to upgrade its outlook for India’s GDP growth in 2023 by 70 basis points to 5.5%.
Rebound in capex widens fiscal deficit
However, a rebound in capex has also resulted in a further widening of the fiscal deficit as a percentage of the budget estimate. Fiscal deficit is the difference between the total revenue and total expenditure of the government during a financial year.
According to government data, the fiscal deficit at the end of January FY23 stood at ₹11.9 lakh crore, or 67.8% of the full-year budget estimates. At the same point last year, the fiscal deficit stood at only 58.9% of FY22’s budget estimate.
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Apart from capex, another reason for the higher fiscal deficit this year so far is an increase of ₹48,900 crore in subsidies, according to a report by ICICI Bank Research.
On the revenue side, a moderate 9% growth in net tax revenues coupled with a decline of 21% in non-tax revenues also added to the widening gap between the government’s revenue and expenditure.
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