For now, the government plans to stick to the provisions made in the 2023-24 annual budget, and doesn’t have any plan to exceed the provisioned capex, one of the officials said on condition of anonymity.

“It’s too early to think about capex recalibration,” the person said. “We will not do any such thing till the revised estimate discussions happen in October-November 2023,” the person added.

However, a fresh assessment of higher gross domestic product (GDP) growth before the end of the calendar year could provide the government with more legroom for expanding expenditure.

While the Reserve Bank of India (RBI) expects the Indian economy to grow at 6.5% this fiscal, economists at State Bank of India (SBI) estimated the economy to have grown 8.3% in the June quarter, and exceed RBI’s GDP forecast for this fiscal.

A Union finance ministry spokesperson didn’t respond to queries.

The government, which unveiled ₹1.18 trillion worth of programmes spanning mobility to digital sectors recently, plans to make more mega announcements during the festive season until the year-end, Mint reported earlier this month. The proposed announcements may include a ₹1 trillion mission mode project to modernize the railway signalling system, a ₹3 trillion Bharatmala Phase-2 programme to boost connectivity to infrastructure projects such as multi-modal logistics parks and ongoing expressways, a ₹5,000-crore incentive package to encourage the construction of vessels and ships to develop a blue economy, and a viability gap funding (VGF) scheme for coal gasification. Financial-support initiatives targeting the agricultural and micro, small and medium enterprises (MSME) sectors may also be announced.

“The schemes announced by the government recently will have no impact on this year’s fiscal-deficit targets as outlay for these will be staggered over several years,” the official said.

However, with the Indian economy expected to experience the effects of the global slowdown in the fiscal second half, the government, if required, could also take a decision on enhancing the budget of its flagship rural jobs scheme, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which saw a 33% lower allocation during the fiscal due to a pick-up in economic activity.

The government has allocated a record capex budget of ₹10 trillion for FY24, aiming to stimulate economic growth through increased public spending and fostering private investment. Interestingly, several ministries have already spent nearly half of their allocation in the first 4-5 months of the year and are on course to complete the full allocated spending by December.

With private investment not picking up as expected, government initiatives are expected to support the capex cycle to fuel the economy. However, if the economy clocks a better-than-expected nominal GDP growth, the government will have more space to maintain the fiscal-deficit target, experts said.

The government’s fiscal deficit target for 2023-24 is estimated at 5.9% of gross domestic product (GDP).

“It’s also possible that we are seeing better revenue generation, more on account of compliance, and due to a buoyancy in tax collection. Corporate performance was good during the first quarter, so corporate tax collection could continue to be good this year. These will give the government some leg room to go for additional expenditure,” said Madan Sabnavis, chief economist at the Bank of Baroda.

“However, during Feb-March 2024, if we are in a position to breach the fiscal deficit target, then automatically there is a case of cutting down discretionary expenditure. The government then can still announce capex schemes and make payment next year,” he added.

Updated: 29 Aug 2023, 12:29 AM IST