While income constraints led to a sharp decline in capital expenditure by state governments in FY21, the Centre and public sector enterprises (CPSEs) owned by it largely held the fort, retaining the share of public expenditure in the gross domestic solution (GDP).
The combined capital expenditures by 37 significant CPSEs and departmental undertakings – all with annual capex budgets above Rs 500 crore – have been Rs 4.6 lakh crore in FY21. This was 92% of the Rs 5-lakh-crore target for the year and 4.3% greater than the capital spending by these entities in the prior year.
Among these government entities, NHAI was the biggest investor with capex roll-out of Rs 1.25 lakh crore in FY21, overtaking Indian Railways for the initially time. NHAI’s achievement was 110% of its annual target and up 20% on year. Road minister Nitin Gadkari lately stated that the pace of highways building in the nation touched a record 37 km/day in FY21.
Railways invested Rs 1.24 lakh crore in FY21, which was about 78% of the annual target, and down 8% on year.
Railways was followed by IOC (Rs 30,000 crore or 115% of its target), ONGC (Rs 25,000 crore, 77%), NTPC (Rs 23,000 crore, 110%) and HPCL (Rs 18,000 crore, 156%). Power Grid also exceeded its FY21 investment target of Rs 10,500 crore by attaining Rs 10,800 crore. However, Neyveli Lignite Corporation accomplished only Rs 2,800 crore or 42% of its FY21 target of Rs 6,700 crore.
Of course, as the chart shows the CPSE capex development also slowed significantly considering that FY18, but the price of decline in the development has been reduce than that in other segments of the economy like private investments and private consumption or, of late, even in state government capex.
In FY21, state governments have created cold feet in sustaining the capex tempo, but CPSEs, regardless of an erosion of their money surplus and income in a slowing economy, largely maintained the pace, thanks to continuous prodding by the finance minister Nirmala Sitharaman.
Reacting to the Q3FY21 GDP information, the finance ministry stated lately that the .4% development in the quarter soon after two consecutive quarters of deep contraction reflected “further strengthening of V-shaped recovery” that started in Q2. The resurgence of the gross fixed capital formation was also triggered by robust capex by the CPSEs and the Centre. The fiscal multipliers linked with public capex are at least 3-4 instances that of government final consumption expenditure, it stated.
While public capex appeared to have sustained the tempo in Q4FY21 as nicely, the second Covid wave is now threatening to slow the pace. More than 80% of the FY21 capex by the 37 CPSEs and departmental units are funded by their personal surpluses and loans though the balance funds came from the Union Budget.
The Centre has managed to invest Rs 4.1 lakh crore as spending budget capex throughout April-February, up 33% on year the FY21 target was Rs 4.38 lakh crore (up 30.8% on year).
As reported by FE earlier, Capital expenditure by state governments will probably shrink in FY21, bucking the trend of robust development in fixed asset creation reported by most of them in current years. According to an FE critique of budgetary spending by 16 main states, their capex was down 16% on year in April-February, compared with a damaging development of 5% in FY20.
In FY20, public capex was roughly in the 5:3.6:3.4 ratio amongst the states (spending budget), CPSEs (personal funds) and the Centre (spending budget). However, this ratio will probably alter to 3:4:4.5 or thereabouts in FY21 as the share of states in public capex has fallen.