New Delhi [India], January 6 (ANI): The government may fall short of its capital expenditure (capex) target for the financial year 2025, according to a report by Motilal Oswal.
The report stated that the total capital spending by the Centre, budgeted at Rs 11.1 trillion for FY25, has declined by 13.5 per cent year-on-year (YoY) in the first half of the fiscal year.
The shortfall has been attributed to Lok Sabha elections by experts because the elections enforced model code of conduct and govt expenditure was restricted to old projects.
In the first six months of FY25, the government has achieved only 39.1 per cent of its budgeted capital expenditure. This raises concerns about meeting the full-year target, as significant growth in spending is required in the latter half of the fiscal year.
The report highlighted mixed performance across the quarters. While the Centre’s capex showed a notable increase of 14.6 per cent YoY in the second quarter of FY25, there was a sharp contraction of 35.4 per cent YoY in the first quarter.
To meet the annual target, the report stated that the capital spending must grow by an ambitious 50.5 per cent YoY in the second half of the fiscal year.
The report believed that achieving such a high growth rate in spending within a limited timeframe could be challenging.
So the report said “GoI is likely to fall short of its FY25 capex target”
The government’s capital expenditure (capex) has seen a significant rise over the past five years, increasing 3.3 times from Rs 3.4 trillion in FY20 to Rs 11.1 trillion budgeted for FY25.
Excluding loans and advances (L&As), the Centre’s capex for FY25 is estimated at Rs 9.2 trillion.
However, in the first half of FY25, the government’s capex fell by 13.5 per cent year-on-year (YoY), reaching only 39.1 per cent of the budget estimate. This is lower than the 50 per cent achieved in the first half of each of the last two years. Notably, the capex during this period was the lowest in a decade, barring the COVID-19-affected FY21.
This trend raises concerns about meeting the full-year capex target, especially as spending momentum remains subdued in an election year.
Capital expenditure is a crucial driver of economic growth, as it facilitates infrastructure development and creates employment opportunities. Any significant shortfall could impact growth projections and key sectors dependent on government investment. (ANI)
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