Capex contracted, revenue expenditure gained pace in October: CGA data

Persistent contraction in central government’s capex for the third month in a row in October even while revenue expenditure picked up pace during the month, may limit the support of government expenditure to a sluggish economy in the December quarter, unless the trend reverses.

 

According to the data released by the Controller General of Accounts (CGA) on Friday, capex in October contracted 8.4 per cent while revenue expenditure, excluding interest payments, rose 41.9 per cent during the month.

 

During April-October period, capex contracted 14.7 per cent while revenue expenditure grew 8.6 per cent, leading to the total expenditure expanding 3.3 per cent.

 

 

Government officials have indicated that the Centre may relax cash management guidelines for the last quarter (January–March) of FY25 to allow lagging departments and ministries to utilise their allocated capital expenditure (capex) for the financial year.

 

Currently, the guidelines stipulate ministries to not exceed 33 per cent of their Budget Estimates for the March quarter and 15 per cent of the last month of a financial year. 

 

 

Currently, the guidelines require ministries to limit their expenditures to no more than 33 per cent of their Budget Estimates for the March quarter and 15 per cent for the last month of the financial year.

 

CGA data showed the central government exhausted 46.5 per cent of its fiscal deficit target for FY25 during the April-October period compared to 45 per cent during the same period a year ago.  

 

Experts feel that the government is likely to miss the target of Rs 11.1 trillion capital expenditure in the current financial year, and said the unexpected contraction in capex could possibly have been due to the ongoing festival season.

 

“To meet the FY2025 target, the government needs to incur a capex of Rs 1.3 trillion per month during November-March FY2025, which entails a daunting year-on-year (Y-o-Y) expansion of 61 per cent. The anticipated miss in the capex target is expected to offset any shortfall on account of disinvestment and taxes,” said Aditi Nayar, chief economist, ICRA Limited.

 

The government has set a fiscal deficit target of 4.9 per cent of GDP for the current financial year.

 

The total revenue receipts stood at 54.5 per cent of the budget estimates during April-October period compared to 59.6 per cent in the corresponding period last year. Of this, the net tax revenue was 50.5 per cent of the budget estimates as against 56 per cent last year during the same period.

 

The net tax revenues for April-October 2025 rose by 0.2 per cent Y-o-Y on account of additional devolution of taxes while non-tax revenues expanded by 50 per cent boosted by the RBI dividend.

 

Revenue expenditure grew by 8.7 per cent for the April-October FY2025 period.

 

Gross tax collections rose by 1.6 per cent on a Y-o-Y basis in October 2024. While corporate tax collections rose by just 1.2 per cent Y-o-Y in April-October FY2025, income-tax collections have expanded by a much higher 20.2 per cent. Experts said these trends may have been partly distorted by the timing of refunds.

 

ICRA said income-tax collections may surpass the FY2025 revised budget estimate of Rs 11.5 trillion, unless large refunds are released in the latter part of the fiscal, while corporation tax inflows may print in line or slightly lower than the target.