Capex stagnant, to go up later

CAPITAL EXPENDITURE: Capital expenditure expected to expand 7.8 per cent in 2009-10.

The Centre’s capital expenditure on creating productive assets, as a proportion of its total expenses, is projected to increase marginally in 2009-10.

The government’s budgeted allocation for capital expenditure as a share of the total expenditure will stand at 11.03 per cent in 2009-10, compared with 10.82 per cent in the current fiscal year, budget data show.

Capital expenditure is for building assets and capacities across sectors, which in turn lead to more jobs. Its share in total government spending has been falling since 2003-04, with the exception of 2007-08. Budget documents show that the proposed capital expenditure is expected to expand 7.8 per cent in 2009-10 to Rs 1,05,146 crore, from the revised estimates of Rs 97,507 in the current financial year.

However, planned capital spending proposed for 2009-10 dipped 11 per cent and stood at Rs 36,800 crore as against the revised figure of Rs 41,301 crore in the current financial year. This is the first contraction in the government’s planned capital spending since 2006-07. Budget estimates of 2009-10 show that the share of planned capital spending in total capital spending in the year is at its lowest (at about 3.86 per cent).

This was seen even as Finance Minister Pranab Mukherjee called for additional government spending in the backdrop of the economic slowdown when a new government takes over.

“..Plan expenditure for 2009-10 may have to be increased substantially at the time of the presentation of the regular Budget if we are to give the economy the stimulus it needs to cope with the global recession that is likely to continue through the year. In the current environment, there is a clear need for contra-cyclical policy and it calls for a substantial increase in expenditure in infrastructure development, where we have a large gap, and in rural development,” he said in the budget speech.

As seen in previous years, the highest capital expenditure for 2009-10 has been proposed for the defence services, at Rs 54,824 crore, an increase of 33.71 per cent over the revised estimate of 2008-09. Moreover, the government has proposed to spend Rs 13,179 crore in building capital assets for higher education, which is 16.2 per cent more than the revised estimate of 2008-09.

One of the highest increases in capital spending allocation was seen in the Department of Posts, for which the government sanctioned capital expenditure worth Rs 423.3 crore in 2008-09, a rise of 65.4 per cent over the revised estimate of Rs 255.6 crore in 2008-09.