In an interview with Mint, Sitharaman said though several capex projects have long gestation periods of 24 to 36 months or more, monitoring by the finance ministry showed that projects are best developed when the capex is used within 12 months.

“… capital expenditure is made on long-term or medium-term projects. So that money which is given is used to create assets over a period of 24 to 36 months or even longer sometimes. But the condition that we put is that you spend that money within 12 months. My monitoring clearly showed me that wherever capex is used up within 12 months, people have done brilliantly. And therefore, they utilised it,” the finance minister said.

The interim budget has raised central capex allocation by 11.11% (over BE FY24) to ₹11.11 trillion to develop infrastructure projects in the year starting 1 April, building on substantial increases in recent years to spur economic growth. Though capex has increased for FY25, the rate of growth is slower than in previous years. Capex grew by 37% in FY24 (over the previous year’s BE), 24% in FY23, and 40% in FY22.

The finance minister said this was not because the absorption power of implementing agencies had dropped but because capex levels were already high and would now only see a proportionate increase.

“Capex grew from ₹3 trillion to ₹10 trillion over past few years. The growth on a higher base will only be proportionate. From a higher base, 11% is quite a big hike and ₹11 trillion is a big amount, accounting for about 3.4% GDP,” the finance minister said.

She said there were signs that private-sector investment was picking up in sunrise sectors such as renewables, and those with productivity-linked incentive (PLI) schemes.

“… so, the investments are coming into those areas. There is clear sign up. But if you were going to search only in cement and old steel factories, then this investment is yet to pick up,” Sitharaman said.

She said there was also an increase in capital expenditure by states, as indicated by the increase of central credit available to them under the 50-year interest-free special assistance scheme to ₹1.3 trillion. The first two years showed terrific completion and achieved full outlay, she said, adding that this year, the scheme may be used by states to complete projects in which substantial progress had already been seen using funds from the union government over the past two years.

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Published: 05 Feb 2024, 11:10 AM IST