Centre asks states to enhance capital expenditure

The Centre today nudged states to enhance capital expenditure and invest more in rural areas and infrastructure.
"States are requested to align their focus to the thrust provided in the Union Budget to promote investment and growth in the rural sector... It is imperative to step up capital expenditure at state level also," Finance Secretary Ratan Watal said.
Addressing the second conference of state finance secretaries here, Watal said the Centre has accepted the recommendations of 14th Finance Commission (FC) and that will give larger funds and greater autonomy to states.
"Total transfers to states including grants in aid from centre to state are estimated to be 9.47 lakh crore in 2016-17 as compared to 8.36 lakh crore during 2015-16, which is an increase of 12 per cent of RE of 2015-16," Watal said.

He said the Centre has also approved an additional fiscal deficit to eligible states during the remaining period of the award from 2016-17 to borrow more under the two flexibility options.
"The states will get additional space to raise borrowings, which may result in such needed government expenditure for capital projects and infrastructure," Watal said.

The Union Cabinet last week allowed states with sound finances to borrow an additional 0.5 per cent of their GDP over and above the 3 per cent prescribed by the 14th FC to help them meet their developmental needs.
Watal said prudent expenditure management by exploring the possibility of rationalising the subsidies, certain state subsidies and grants can help states maintain revenue balance so that capital expenditure can be increased.

"With a view to giving further impetus to public investment and infrastructure, it has been decided to give additional resources to the extent Rs 31,300 crore through issuance of bonds, by CPSEs and ministries like power, renewable energy, shipping, agriculture," he said.
Watal said to ensure macro economic stability and prudent fiscal management, the Centre has stuck to the fiscal deficit target of 3.5 per cent in 2016-17.
"The global economy is still struggling and it may take some time for it to stabilise. Economic shocks elsewhere in the world are felt in the domestic markets. Despite the sluggish scenario, the Indian economy has shown steady improvements in the recent periods," he said.

Rating agencies across the world have estimated that India will be the engine of global growth, Watal added.