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Union Finance Minister Nirmala Sitharaman, on Monday, revealed that the budgeted capex for FY21 has been more or less spent by the end of January. As much as ₹5.51-lakh crore of the budgeted capex of ₹5.54-lakh crore for FY21 has already been spent, she said. She was responding to a question at a Conclave on the Union Budget 2022, organised by Doordarshan, as to whether the sharp increase in allocation for FY22 (₹7.5-lakh crore) would be spent this fiscal.
She also strongly defended Centre’s decision to increase capex in the Union Budget 2022-23 to ₹7.5-lakh crore against ₹5.54-lakh crore in the previous year, stating it will create a multiplier effect on the economy.
Quoting studies by the RBI and various research agencies, the Minister said that if ₹1 is spent on infrastructure such as roads, bridges, airports and ports, the return during the year will be up to ₹2.45, and the benefit will be around ₹3.45 by the time the project is completed.
However, if ₹1 is given directly to an individual to spend, it will increase demand in the market and improve consumption, but the multiplier effect will just be 0.98 times. Spending on infrastructure was the best way to get returns. Only after this was proved, the government focussed on capex since last year, she said.
The Minister said that of the ₹7.5-lakh crore allocated for capex in this year’s Budget, nearly ₹1-lakh crore was for State governments, which is interest-free, and returnable after 50 years. State governments are free to spend about 85 per cent of the amount given according to their will, but there are certain conditions on spending the balance 15 per cent on projects like solar, she said.
The multiplier effect through capex spending will ensure that money reaches the grass root level; help in employment generation; boost consumption; and improve economic activity, she said.
Ukraine crisis
What will be the impact of the Russian invasion of Ukraine and its fallout? When this question was posed to the FM, she said that while there certainly will be an impact, it was too early to guage its extent. It has to be seen how oil prices will react and where oil futures will go. The government is seized of the matter and is considering steps that needs to be taken to protect people from any impact. The government will take action step-by-step, she added.
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