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Govt capital spending to go up 26% by FY20

Anjana Das, New Delhi
10/08/2017   0 Comments

Government’s capital expenditure has been budgeted to be Rs 3, 09, 801 crore in 2017-18 which is likely  to increase by 10% to Rs 3,41,000 crore in the next fiscal pushed mainly by a rise in defence and infrastructure spending, the Mid Term Economic Framework stated today.
The mid year review of expenditure tabled in the Parliament today also upped the capital spending projections by 26%  for 2019-20  to  Rs 3,90,000 crore.
Capital expenditure constitutes 14.4% of total expenditure in BE 17-18. This is expected to increase to 14.6% in 2018-19 and to 15% in 2019-20.
As a percentage of GDP, capital expenditure  is projected to remain at 1.8% of GDP, in the medium term.
The major items of capital expenditure for the Government is Defence (Capital Outlay) at Rs 86,488 crore according to BE 2017-18, this constitutes 28% of the total capital expenditure of Government. The next important components of capital expenditure is Railways (Rs 55,000 crore), Road Transport & Highways ( Rs 54,177 crore), Urban Development (Rs 19,332 crore) and Department of Financial Services ( Rs 14,718 crore). These 5 together constitute more than 74% of all capital expenditure. The capital expenditure component in Department of Financial Services is from bank capitalization scheme that is operated by the Department.
In the medium term the capital expenditure on railways is projected to increase by  Rs 10,000 crore in 2018-19 and 2019-20 to reach a total of Rs 75,000 crore in the terminal projection year. The railways are anticipated to focus both on safety related aspects of capital expenditure and also on the opening of new lines in the medium term.
The capital outlay on Defence is also anticipated to increase Rs 1,04,973 crore in 2019-20. The expenditure by the Ministry of Road Transport & Highways is also projected to increase from current levels to a total of Rs 70,000 crore in 2019-20.
The expenditure of the Government on food, fertilizer and fuel subsidies have been budgeted to be Rs 2, 40,339 crore in 2017-18. Among the three food subsidy bill compose nearly 60% of the major subsidy bill and fertilizer comprise nearly 29%. The subsidy on fuel takes up the rest. The subsidy bill as a % of GDP is budgeted to be 1.4% in 2017-18. This ratio has been projected to decrease by 0.1 percentage point over the course of the next two years.
Interest payments constitute the largest component of Centre’s revenue expenditure. In BE 2017-18, interest payments have been estimated at Rs 5,23078 crore constituted 24% of the total expenditure of the central government. As a percentage of gross tax revenue this constituted 27%. With the primary deficit budgeted at Rs 2, 3454 crore (0.1% of GDP), the interest payments nearly equal the Fiscal Deficit of the country. Interest Payments work out to 3.1% of GDP. This is partly reflective of the declining trajectory of the fiscal deficit, MTEF said.
Though interest payments were budgeted to be Rs 4, 92670 crores in 2016-17, the Provisional Actuals for interest payments in 2016-17 worked out to Rs 4, 80519 crores. This fall of interest payments by more than Rs 12,000 crores is indicative of the economy moving towards a more benign interest rate cycle.
The MTEF Projections for the nominal interest payments for the years 2018-19 and 2019-20 have been pegged at Rs 5,64,400 crore and Rs 6,15,000 crores. These show a steady increase in absolute terms but has been projected fall if calculated as a % of Gross Tax Revenue (GTR) and Revenue Receipts (RR). As a proportion of GTR and RR the interest payments are projected to fall from the BE 2017-18 levels of 27.4% and 34.5% to 25.7% and 33.2% in 2018-19 and 24.4% and 32.3% in 2019-20. This is partly a result of the robust tax revenue growth that has been assumed by thew Government.
During the course of the current financial year, it is expected that the increase in HRA that was recommended by the 7th Pay Commission will lead to an additional expenditure on salaries to the tune of `11,500 crore for the remaining 8 months of the financial which will required to be provided at the Revised Estimates stage.
Salary projections (net of Defence salaries) in absolute terms is therefore kept to Rs 1,38,122 crore in 2018-19 and Rs 1,49,457 crore in 2019-20.
In MTEF projections, the expenditure on pension payments includes both Defence and civil pensions and is  without  postal pensions. Pension commitments will increase by about 10% in 2018-19 and 8% in 2019-20 over previous year’s estimates/projections. From the base year pension amount of Rs 1,31201 crores in 2017-18, MTEF projections for pension has been kept at Rs 1,44,321 crore and Rs 1, 55867 crore in FYs 2018-19 and 2019-20 respectively.


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