An opportunity in capex decline

The govt should scrap further capital allocation for new schemes and equity infusion into BSNL

- A K BHATTACHARYA

The Union government's capital expenditure (capex) continues to be a cause for concern. Of course, the extent of its decline has reduced somewhat from 35 per cent at the end of the first quarter of the current financial year to 15 per cent at the end of six months. But the latest number for the April-November 2024-25 period shows that the Union government's capex was still 12 per cent lower than what it was in the same period of 2023-24. Instead of aiming for the targeted 17 per cent growth to ₹11.11 trillion in capex for 2024-25, the government will have to strive hard to at least cross the figure of ₹9.48 trillion reached last year.

What has led to this decline? A widely held view is that the seven-phase general elections, which began on April 19 and ended on June 1 last year, caused a slowdown in capex. But if that indeed is the reason, the decline in capex in the first quarter should have been reversed in the second quarter of 2024-25. And certainly, the first two months of the third quarter should have raised the trajectory of capex growth to a higher level. There has been some improvement, but a 12 per cent decline in the April-November 2024-25 period is no comfort.

Look at the slightly different trajectory seen in the Union government's revenue expenditure growth during the same period. The Budget for 2024-25 had projected a rise of over 6 per cent to ₹37.1 trillion in revenue expenditure. At the end of June 2024, the growth was just about 2 per cent, but it has been rising since then, reaching 4.2 per cent by the end of the first six months of 2024-25 and climbing even higher to 7.8 per cent during April-November 2024-25.