FM Nirmala Sitharaman Asks High Capex Ministries, Including Railways, To Boost Spending

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Snapshot

Taking note of the slow spending in the rail sector, Finance Minister Nirmala Sitharaman has written a letter to Railway Minister Aswhini Vaishnaw, to step up the budgeted capital expenditure to shore up the economy.

 

Taking note of the slow spending in the rail sector, Finance Minister Nirmala Sitharaman has written a letter to Railway Minister Aswhini Vaishnaw, to step up the budgeted capital expenditure to shore up the economy. This is part of the finance ministry’s letters to all ministries to boost capex spending before the year draws to a close.

The Railways incurs capital expenditure on electrification, new lines, doubling and rolling stock procurement among other items.

Sitharaman has pointed out that capital expenditure of the Railways till November-end 2021 was only 61 percent of the budget target.

“It is noted that the capex performance of your ministry till November 2021 was only 61 percent of the budget target,” Sitharaman said in a letter to Vaishnaw, accessed by the Swarajya.

The total Capex for Indian Railways in the fiscal 2021-22 is Rs 1,07,100 crore out of which the national transporter could spend only about Rs 65,331 crore in the first eight months of the current financial year.

“Hon’ble Prime Minister had also prompted us in the Cabinet meetings to step-up the capex significantly. Considering the slow pace of expenditure, I request you to hold weekly review meetings from now onwards to ensure that at least 75 percent of the budget targets are met by December 2021 and 100 per cent of the targets are met by 15 March 2022,” the letter read.

lndia’s public capital expenditure, or Capex is expected to ignite recovery in an environment where weak demand has kept private sector investments tepid.

In an earlier letter written to Railway Minister in September this year, she had requested for frontloading of capital expenditure to stimulate the economy through public spending on capex, especially when the private investments into the economy are yet to pick up.

Since private investments are yet to pick pace, Sitharaman has been keen on front-loading capital spending to aid a fledgling economic recovery.

According to studies, government Capex has a higher multiplier effect on economic output compared with revenue expenditure.

For instance, a 2019 Reserve Bank of India report finds that centraI government Capex has a multiplier of 3.25 which means a Re 1 increase in Capex pushes output up by Rs 3.25.

Besides the Railways, capital spending in other infrastructure ministries including road, aviation has been lackadaisical.

“For all infrastructure ministries put together, the numbers indicate continuation of sluggish performance,” Sitharaman wrote.

After Finance Minister’s critical observation, the Railways has directed all Additional Members of the Board to begin close monitoring of project implementation at all levels and sought weekly reports.

The Railways maintain that capital expenditure is likely to go up now as it always picks up during November-March period.

Currently, pre-budget meetings are underway in various ministries including the Finance Ministry.