Capital expenditure to see over 34% jump

The Budget has proposed over 34 per cent increase in capital expenditure for next fiscal.

“For 2021-22, I propose a sharp increase in capital expenditure and thus have provided ₹5.54 lakh crore, which is 34.5 per cent more than the BE of 2020-21. Of this, I have kept a sum of more than ₹44,000 crores in the Budget head of the Department of Economic Affairs to be provided for projects/programmes/departments that show good progress on capital expenditure and are in need of further funds. Over and above this expenditure, we would also be providing more than ₹2 lakh crore to States and autonomous bodies for their capital expenditure,” Finance Minister Nirmala Sitharaman said in her Budget speech.

Chief Economic Advisor K Subramanian says, ₹1 worth of capital expenditure has multiplier effect up to ₹4. In infrastructure sector, the implication could be as ₹2.50. Expenditure is categorised into two — capital and revenue. Capital is also known as developmental expenditure while revenue comprises expenditure for salaries, subsidy, debt servicing and defence beside others.

Also read: Budget 2021: Behind the fiscal math

The Minister further added that in order to boost investment in infrastructure sector, the proposal is to enhance the share of capital expenditure not just in central budget but also for states. “In accordance with the views of the 15th Finance Commission, we are allowing a normal ceiling of net borrowing for the states at 4 per cent of GSDP for the year 2021-2022. A portion of this ceiling will be earmarked to be spent on incremental capital expenditure,” she said.

Allocation for various Ministries have got higher share for capital expenditure. For example, allocation for Railway is ₹1,10,055 crores, out of which ₹1,07,100 crores has been earmarked as capital expenditure.

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