The Central government is set to make the highest-ever effective capital expenditure in the fiscal year 2024-25, Union Finance Minister Nirmala Sitharaman said during the proceedings in Lok Sabha. Sitharaman on Tuesday stated that the effective capital expenditure of the Union govt for this fiscal year is pegged at a staggering Rs 15.02 lakh crore, among the highest such spending by the central government.
She said, “Effective Capital Expenditure, inclusive of our capital assistance to the states interest-free…it is pegged at the Rs 15.02 lakh crores, one of the highest in the Government of India’s history.” She said this while replying to the debate in Lok Sabha on the supplementary demands for grants for 2024-25, Sitharaman noted that capital expenditure (CAPEX) is critical for sustaining economic growth and that it plays a key role in creating multiplier effects throughout the economy. After the debate, the supplementary demands for grants (first batch) for 2024-2025 were approved by the Lok Sabha.
“The expenditure on capital accounts generates a multiplier effect that can reach up to 4.3, which is much higher compared to spending on revenue accounts, where the effect is only 0.98,” the Union Minster said.
What is Effective Capital Expenditure?
When the Central government makes spending on something which becomes an asset for the economy and provides future benefits, it is included under the capital expenditure or CAPEX. This includes infrastructure development like the power grid and roads among others, apart from schools, hospitals, financial institutions etc. However, the Centre also make some spending that is indirectly infused in the capital expenditure. This spending is the grant-in-aid to the state governments. So, while Capex includes the Centre’s spending on capital-generating projects, Effective capex includes capex and financial assistance to the states.
(With inputs from agencies)