Budget 2025: Effective Capital Expenditure Declined By Rs 1.84 Lakh Crore This Year

Just Rs 3 lakh crore is likely to be utilized against the budgetary provision of Rs 3.91 lakh crore, which is a substantial decline.

Krishnanand

Despite a massive increase in the capital expenditure by the Central government, the data showed that not all the funds which were allocated for the current financial year could be utilized and as a result, effective capital expenditure for the current financial year ending in March this year, declined by Rs 1.84 lakh crore against the budgetary allocation.

As per the latest data shared by the finance minister in the union budget for FY 2025-26, the actual capital expenditure for the previous fiscal (FY 2023-24) turns out to be around Rs 9.5 lakh crores (Rs 9,49,195 crores).

If one takes into account the grants in aid for the creation of capital assets then an additional Rs 3 lakh crores (Rs 3,03,916 crores) were spent as capital expenditure, taking the effective capital expenditure in FY 2023-24 to a record high of over Rs 12.5 lakh crores (Rs 12,53,111 crores).

As the private sector was reluctant to pitch in increasing investment therefore the Union government has increased its capital expenditure massively in the last five years, particularly to tide over the Covid-19 global pandemic-induced slowdown in the economy.

For the current financial year, Finance Minister Nirmala Sitharaman allocated a record Rs 11.11 lakh crore (Rs 11,11,111 crores) as capital expenditure when she presented the first regular budget of Prime Minister Narendra Modi’s third government in July last year.

It was aimed at giving a booster shot to infrastructure creation as the capital expenditure had slowed down due to the imposition of a model code of conduct ahead of the general election last year and also due to the transition phase of the government.

The budgetary allocation for grants in aid for the creation of capital assets was also increased to a record Rs 3.91 lakh crores (Rs 3,90,778 crores).

Why is there a dip in capex against budgetary allocation?

Capital expenditure given in the union budget has two components.

The first and largest part of the effective capital expenditure is the capital expenditure given for the project directly executed by the central government’s departments and ministries. In addition to this capital expenditure, the Centre also gives grants in aid for the creation of capital assets to states.

The Centre may also lay down norms and conditions for the states to avail this grant in aid for the creation of capital assets.

For the current financial year, while the Centre’s own budgeted capital expenditure is Rs 11.11 lakh crore, the budget for grant-in-aid for the creation of capital assets is around Rs 3.91 lakh crore.

However, the revised estimates presented by the finance minister show that while the Centre’s capital expenditure is set to decline by Rs 92,682 crores this year, a decline of more than 8 per cent against the sanctioned budget, utilization of grants in aid for the creation of capital assets declined substantially in this fiscal.

For example, only Rs 3 lakh crore is expected to be utilized against the budgetary provision of Rs 3.91 lakh crores, a substantial decline of Rs 90,887 crores or a decline of over 23 per cent.

As a result, the effective capital expenditure is expected to decline by Rs 1.84 lakh crore this fiscal, a cumulative decline of over 12 per cent.

Despite underutilization this year, finance minister Sitharaman has increased the budgetary allocation for both capex and grant in aid for the creation of capital assets to a record Rs 11.21 lakh crores (Rs 11,21,090 crores) and Rs 4.27 lakh crores (Rs 4,27,192 crores), taking the effective budgeted capital expenditure to a record Rs 15.48 lakh crores for the next fiscal.