Centre weighs in with ₹90,000 cr to pump-prime the economy

With private investments not coming in as expected, the Centre turned the big spender in the first few months of the financial year 2016-17 to pump-prime the economy.

At ₹90,000 crore, the Plan Expenditure in the first two months of the fiscal was the highest in the last five years; the spending is likely to have crossed ₹1-lakh crore in the first quarter.

The Plan Expenditure for whole of 2016-17 is estimated at ₹5.5-lakh crore, an increase of 15.3 per cent from the Budgeted target of ₹4.65-lakh crore last fiscal.

“Final figures are still to be collated, but it is estimated that the Plan Expenditure was at least ₹1.1-lakh crore between April and June 2016,” said a senior Finance Ministry official.

Data with the Controller-General of Accounts revealed that the Centre’s Plan Expenditure totalled ₹90,570 crore by May 31, against ₹62,106 crore in the corresponding period a year ago.

“There is a focus on higher Plan spending, especially capital expenditure to boost growth. Given the higher allocation for Plan Expenditure in the Budget, it was expected that it would be reflected in the actual spending by Ministries,” said another Finance Ministry official.

Key Ministries Key spenders during the period included the Ministries of Rural Development and Human Resource Development as well as infrastructure ministries of highways, power and railways.

Transfers to States by the Finance Ministry also doubled to ₹7,030 crore, while the focus on Swachh Bharat and clean drinking water seems to have increased.

While the Centre is banking on a recovery in private demand and investments following a good monsoon that could help push the economy’s growth to 8 per cent in the fiscal, it will not hesitate to spend to spur the economy.

However, analysts cautioned that private investments will take time to revive. “Private investment remains muted, despite interest rate cuts in the past 18 months, inflation and currency stability, and a significant improvement in the pace of project approvals.

“This indicates that headwinds such as excess capacity and high leverage continue to weigh on private-sector business confidence…,” said StandardChartered in a recent note.

Plan revenue expenditure However, economists feel that within the Plan Expenditure, it is the spending on revenue account that was on the higher side in the period and could indicate spending held back in the previous fiscal.

“Much of the Plan Expenditure may have been that which was held up in the last fiscal. Had it been new demand, it would have shown on the capital account,” said DK Srivastava, Chief Policy Adviser, EY.

Between April and May 2016, the Plan revenue expenditure was ₹74,609 crore, or 18.5 per cent of the full-year estimate, against ₹43,731 crore, or 13.3 per cent of the BE in the last fiscal. Plan capital expenditure was ₹15,961 crore by May 31, 2016 against ₹18,375 crore a year ago.

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