Govt: Capex, developmental spending, subsidies to go on as planned

NEW DELHI: Govt Wednesday said it is going ahead with planned capital expenditure, developmental spend and subsidy payments, and no budget cuts were planned. Days after PM Narendra Modi’s calls for reducing non-essential spends such as overseas weddings, fuel consumption and fertiliser use, officials argued there was no plan for “austerity”, which usually suggests budget cuts, reduced govt spending, lower subsidies and fiscal tightening.

“PM Modi’s appeal is not about spending less. It is about spending more wisely by reducing fuel consumption, avoidable dependence on imported goods and foreign-currency-intensive services… govt is not implementing austerity measures which have negative economic connotations,” an official said.

Govt has budgeted a record capital expenditure of Rs 12.2 lakh crore, much of it for highways and railways. Since the pandemic, Centre has stepped up capex in the hope of a multiplier effect resulting in higher demand for steel, cement and other inputs, while ensuring employment remains strong and triggers private sector expansion. Higher spending is also seen as critical to keep demand strong, especially as a weak monsoon is forecast, which may hurt rural demand.

With private spending expected to take a hit due to the West Asia conflict, govt is hoping its capex plans will keep momentum going till normalcy is restored. Besides, higher oil and gas prices are expected to push up fertiliser costs and govt may have to deal with a subsidy bill exceeding Rs 2 lakh crore. Oil companies may also need compensation for selling cooking gas cylinders below market rates.

Economists are projecting pressure on the fiscal deficit, budgeted at 4.3% of GDP this year.

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