Finance minister Nirmala Sitharaman has emphasized the government’s commitment to expediting infrastructure development by strategically investing in shorter-duration projects. Despite the typical long gestation periods of 24 to 36 months for capital expenditure (capex) projects, Sitharaman’s monitoring has revealed that optimal results are achieved when capex is utilized within a 12-month timeframe.
In a recent statement, Sitharaman outlined the government’s plan to fully leverage the highest-ever capital expenditure allocation from the interim budget. The focus is on efficiently utilizing funds to propel the country’s infrastructure growth. The minister stressed that while many capex projects have extended timelines, the key lies in completing them within a year for maximum effectiveness.
The interim budget reflects a significant 11.11% increase in central capex allocation, amounting to ₹11.11 trillion for the upcoming fiscal year. This allocation aims to support and drive various infrastructure projects starting from April 1. Despite the noteworthy increase, the growth rate is comparatively slower than in previous years, attributed to the already elevated capex levels.
Sitharaman addressed concerns about the perceived slowdown, clarifying that the deceleration is a consequence of the substantial growth in capex from ₹3 trillion to ₹10 trillion over recent years. She emphasized that an 11% increase from such a high base is considerable, constituting about 3.4% of the GDP.
Highlighting positive indicators, Sitharaman noted a resurgence in private-sector investment, particularly in sunrise sectors like renewables and those incentivized by productivity-linked incentive (PLI) schemes. She urged a shift in focus from traditional sectors to emerging opportunities, pointing out that investments in sectors like cement and old steel factories are yet to pick up.
Sitharaman also acknowledged a rise in capital expenditure by states, evident in the increased central credit available to them through the 50-year interest-free special assistance scheme, reaching ₹1.3 trillion. She expressed optimism about the scheme’s success, citing its substantial completion in the initial two years. Additionally, she hinted at its potential use by states to finalize projects that have already witnessed significant progress with funds from the union government in the past two years.
Nirmala Sitharaman’s strategy revolves around optimizing capital expenditure for faster infrastructure development. The emphasis on completing projects within a shorter timeframe and diversifying investments into burgeoning sectors signals a proactive approach towards economic growth and sustainability.