Capex not cut, states got Rs 1.46 trn special assistance in FY25: FM

Finance Minister Nirmala Sitharaman on Tuesday said that the Centre had released Rs 1.46 trillion to states in special assistance for capital expenditure, which is over 95 per cent of the budget allocation till March 26.

 

While stressing that the government had not slowed down its capex push, Sitharaman, in reply to a question by Congress leader P Chidambaram in Rajya Sabha, said, “Capital expenditure has not been cut at all. From Rs 11.11 lakh crore in the FY25 Budget, capex allocation has gone up to Rs 11.21 lakh crore in FY26. Capital assistance to states has also gone up proportionately. Cutting down capital expenditure is not the case with us.”

 

 

The Scheme for Special Assistance to States for Capital Expenditure through 50-year interest-free loans was brought in, in October 2020, amid a tough fiscal environment and a shortfall in tax revenue due to the Covid-19 pandemic.

 

In a statement laid in Parliament, Sitharaman said that state governments have requested for continuing the scheme and enhancing the outlay for the scheme from time to time. In FY25, a total of Rs 1,53,673 crore was earmarked for this scheme.

 

“Such requests have been received in 2024-25, inter alia, from the states of Andhra Pradesh, Rajasthan, Manipur and Nagaland,” she said.

 

A total outstanding of Rs 3,27,558 crore is yet to be released to states under the special assistance scheme.

 

“Capital expenditure has a higher multiplier effect and enhances the productive capacity of the economy. Therefore, the scheme has been included in the Budget of every financial year thereafter,” Sitharaman said in her statement.

 

The finance minister also told Rajya Sabha that the government would come to know of the appropriate utilisation of funds by states for capex purposes with a time lag through Single Nodal Agency accounts, which ensure better monitoring of availability and utilisation of funds by states.

 

The Centre’s capital expenditure for February 2025 contracted by 35 per cent year-on-year, with the overall spend for the April–February FY25 period at 79.7 per cent of the revised estimates against 85 per cent last year, according to the latest Controller General of Accounts data.

 

With just one month left until the close of financial year 2025, the government is falling short of meeting its revised capex target by over Rs 2 trillion.

 

The pace of capital expenditure in the first half of the current financial year had suffered on account of elections and the model code of conduct.

 

SGBs not being used for fund raising

 

The government did not raise funds through Sovereign Green Bonds in FY25 due to the maturing and deepening of the Indian G-Sec market, which helped in mobilising relatively low-cost borrowing, according to a finance ministry statement laid in Parliament on Tuesday.

 

Minister of state in the finance ministry, Pankaj Chowdhary, said in the statement, “Due to the recent gold price volatility and global economic headwinds, this form of borrowings has become relatively expensive.”

 

There have been a total of 67 tranches-wise issuances of Sovereign Gold Bonds till FY25, amounting to 146.96 tonnes of gold. The outstanding value as on March 20, 2025, on issue price is Rs 67,322 crore for 130 tonnes of gold.

 

The SGBs, in addition to other borrowing instruments, have been an instrument for raising resources for financing the fiscal deficit.