Budget banks on higher capex to beat slump

Non-plan capex rises 36.7 per cent to Rs 76,855 crore and Plan capital expenditure 13.2 per cent to Rs 46,751 crore.

The government has allocated Rs 1,23,606 crore for capital expenditure in 2009-10, up 26.7 per cent from Rs 97,507 crore in 2008-09 (revised estimates). Non-plan capital expenditure is up 36.7 per cent to Rs 76,855 crore and Plan capital expenditure 13.2 per cent to Rs 46,751 crore.

Capital expenditure is typically spent on building assets and capacities across various sectors, which in turn create jobs and reflect the strength of an economy.

As a result of the higher allocation, capital expenditure in 2009-10 will be 12.11 per cent of the total expenditure, as against 10.8 per cent in 2008-09 (revised estimates.) This signals a reversal of the trend where the government’s revenue expenditure has been replacing capital expenditure.

This ratio has improved even as the total expenditure has touched a new high. Finance Minister Pranab Mukherjee announced with evident pride that the total expenditure has for the first time breached the Rs 1-million crore mark to touch Rs 10,20,838 crore, up 13 per cent from Rs 9,00,953 crore in 2008-09 (revised estimates).

In fact, the revised estimates for 2008-09 are almost 20 per cent higher than the budget estimates of Rs 7,50,884 crore.

This, was on account of the various initiatives mounted by the government during the year to counter the economic slowdown.

The allocation for planned capital expenditure as a percentage of the total capital expenditure has been coming down over the years.

It was 33.85 per cent in 2004-05. The trend points towards the falling capital expenditure as a percentaage of the total expenditure.

The bulk of the capital expenditure under the Plan head in 2009-10 has been cornered by the Ministry of Road Transport and Highways, Department of Rural Development, Ministry of Urban Development, Ministry of Economic Affairs and the Department of Space.

The highest amount of non-Plan capital expenditure has been cornered by the Defence Ministry.

“Bulk of this enhanced gross budgetary support is directed towards public investment in infrastructure with special emphasis on rural infrastructure, raising growth potential and leading to income generation. Besides, the State Governments will be permitted to borrow additional 0.5 per cent of their gross state domestic product by relaxing the fiscal deficit target under from 3.5 per cent to 4 per cent of their GSDP,” said Mukherjee.