Business Standard
What is Capital Expenditure

Capital Expenditure

About Capital Expenditure

What is Capital Expenditure

Capital expenditure is the money spent by the government on the development of machinery, equipment, building, health facilities, education, etc. It also includes the expenditure incurred on acquiring fixed assets like land and investment by the government that gives profits or dividend in future. 

The Budget estimate of the government's capital expenditure for the year 2020-21 was Rs 1,084,748 crore. The revised estimates of capital expenditure for the 2019-20 Budget came at Rs 1,059,472 crore, while the actuals for the 2018-19 Budget stood at Rs 915,670 crore.
 
Understanding capital expenditure
 
Capital spending is associated with investment or development spending, where expenditure has benefits extending years into the future. Capital expenditure includes money spent on the following:
  • Acquiring fixed and intangible assets
  • Upgrading an existing asset
  • Repairing an existing asset
  • Repayment of loan
Why is capital expenditure important?
 
Capital expenditure, which leads to the creation of assets are long-term in nature and allow the economy to generate revenue for many years by adding or improving production facilities and boosting operational efficiency. It also increases labour participation, takes stock of the economy and raises its capacity to produce more in future.
 
Along with the creation of assets, repayment of loan is also capital expenditure, as it reduces liability.
 
However, the government has to be cautious with the expenditure. In the financial year 2019-20, capital expenditure was 14.2 per cent of Budget Estimates. The government had to cut public spending sharply towards the end of the financial year in order that the deficit target could be met. Total expenditure fell by 0.3 percentage points in 2018-19 over 2017-18. This includes a 0.4 percentage point slash in revenue expenditure and 0.1 percentage point hike in capital expenditure.
 
How is capital expenditure different from revenue expenditure?
 
Unlike capital expenditure, which creates assets for the future, revenue expenditure is one that neither creates assets nor reduces any liability of the government. Salaries of employees, interest payment on past debt, subsidies, pension, etc, fall under the category of revenue expenditure. It is recurring in nature.
 

Latest Updates on Capital Expenditure

Budget 2024: Renewable sector likely to get double-digit capex allocation

Union Budget 2024: Capital expenditure for renewable power may witness a double-digit allocation, with capacity expected to reach 180-gigawatt by FY26, according to a CRISIL report

Updated On : 20 Jun 2024 | 6:28 PM IST
Image

Case for reforms validated by past experience: CII President Sanjiv Puri

India is growing at a time when most economies are under stress, Puri said

Updated On : 17 Jun 2024 | 6:30 AM IST
Image

India may sustain 6.5-7% GDP growth between FY26 & FY30, says UBS

Inflation likely to be lower than RBI's 4.5% FY25 forecast

Updated On : 10 Jun 2024 | 11:01 PM IST
Image

Modi 3.0: Continued capex push for infra, bullet train among priorities

The new railway minister will oversee the execution of several important initiatives in the Centre's 100-day agenda planned before the elections

Updated On : 09 Jun 2024 | 11:44 PM IST
Image

Employment focus to drive capex push for engineering, infra firms: Execs

One of the election agendas was unemployment. You cannot do capex without generating employment. It is interlinked, says analyst

Updated On : 07 Jun 2024 | 11:06 PM IST
Image

FY24 fiscal deficit seen slightly better than projected Rs 17.4 trn: Report

India's income tax receipts rose 17.7% year-on-year to nearly $235 billion in 2023/24, higher than government's projection

Updated On : 09 May 2024 | 6:05 PM IST
Image

Pvt sector investment in FY23 fell to Covid-year levels, govt's share up

Public non-finance corporations' (PSUs) share in investment continued to decline, registering at 9.4 per cent in FY23, according to government data

Updated On : 07 May 2024 | 2:41 PM IST
Image

Vi FPO rings in vigour for telecom sector, may reduce subscriber loss

But low capital expenditure and large debt weigh down Vi's revival prospects

Updated On : 28 Apr 2024 | 11:45 PM IST
Image

Capex push by govt to propel GDP growth between 7.1-7.4% in FY25: NIPFP

However, the review by the NIPFP also listed compression in the government consumption expenditure and a subdued growth in private consumption as downward risks to the forecast

Updated On : 26 Apr 2024 | 7:43 PM IST
Image

Election season may hit govt capital expenditure spending, FDI inflows

In case of FDI, the total FDI inflows was over $50 billion in FY20 and its share during the election months of April-May 2019 turned out to be 18.1 per cent

Updated On : 12 Apr 2024 | 10:35 PM IST
Image

India Inc capital expenditure story gets cement to semiconductor push

The private capex momentum is being led by conglomerates such as Tatas, Reliance Industries and Adani group, among others

Updated On : 11 Apr 2024 | 11:47 PM IST
Image

Engineering insurance premium doubles in 4 years on infrastructure push

Partly aided by premium rates that up by 10-15% since FY20

Updated On : 11 Apr 2024 | 11:30 PM IST
Image

Road ministry capex utilisation in FY24 closes at record high 99.93%

As against the budgetary outlay of Rs 2.645 trillion in FY24, the road ministry has spent Rs 2.643 trillion. By including private investments, the capex goes up to Rs 3.01 trillion

Updated On : 09 Apr 2024 | 10:00 PM IST
Image

AAI planning capex of Rs 30,000 cr in next five years: Jyotiraditya Scindia

AAI Chairman Sanjeev Kumar said the AAI's capex in 2023-24 stood at Rs 5,250 crore. It was a bit higher than the capex of 2022-23, which stood at Rs 5,175 crore

Updated On : 01 Apr 2024 | 8:44 PM IST
Image

Bharti Airtel, State Bank of India, Zomato on Jefferies hotlist for 5 years

Amber Enterprises, specialising in ACs and components, expects earnings to grow over 36 per cent CAGR from FY24-30 due to the PLI scheme

Updated On : 19 Mar 2024 | 2:28 PM IST
Image

India Inc pushes capital expenditure as capacity utilisation nears 75%

Reliance Industries is also investing in a battery giga factory in the new energy business vertical that will be ready by 2026 even as its capex in Reliance Jio in 5G rollout is almost over

Updated On : 04 Mar 2024 | 12:47 AM IST
Image

Consumption survey: No definitive trend yet

The monthly per capita expenditure data points to shifts in consumption, but it should not be used for reconfiguring the Consumer Price Index

Updated On : 28 Feb 2024 | 10:45 PM IST
Image

Private capex in India poised for take off: Mahindra Group CEO Shah

Shah disagreed on the notion of rural-urban divide in growth pattern, and said it was more of a case of income difference and not a market divide

Updated On : 26 Feb 2024 | 7:26 PM IST
Image

Govt on course to achieve small savings scheme collection target for FY24

The government's cash balance is not high too, as borrowings are complete, and it is carrying a modest cash balance to meet its commitments, government sources said

Updated On : 26 Feb 2024 | 10:52 PM IST
Image

India's defence budget masks capital allocations to each service

The only way to estimate the capital allocation for each service is to calculate the allocations to each service over the preceding decade

Updated On : 25 Feb 2024 | 11:05 PM IST
Image