Current Capex Levels Sustainable, Says Finance Secretary TV Somanathan
The government has spent Rs 5.46 lakh crore, 54.7% of the budgeted capex target of Rs 10 lakh crore for FY24, as of October-end.
India's Finance Secretary, TV Somanathan, expressed confidence in the current levels of capital expenditure and hinted that the expenditures for the year will not be 'very far from the budget estimates.'
His comments come ahead of the supplementary demand for grants for fiscal 2024, at a time when subsidy spends—particularly on food, fertiliser and fuel—has raised concerns about fiscal consolidation.
The government has spent Rs 5.46 lakh crore, around 54.7% of the budgeted capex target of Rs 10 lakh crore for FY24, as of October-end, according to data from the Controller General of Accounts. October was also the month when capex spending slowed to Rs 56,296 crore, compared to Rs 1.16 lakh crore in September.
Further, the extension of the free foodgrain scheme 'doesn’t throw the fiscal math off its path', Somanathan told the media gathered after the release of the second quarter GDP data on Thursday.
"It’s an election year, but it’s not a snap election. We knew it was an election year when we started. Nothing has happened so far to change the assumption that we will end this year with a fiscal deficit of approximately 5.9% of GDP. I am confident, as of today, that we will adhere to our fiscal targets."
The government is looking to cut its fiscal deficit to 4.5% of the GDP by FY25–26 from the budgeted target of 5.9% for FY24.
About the fiscal impact of the Pradhan Mantri Garib Kalyan Anna Yojana, Somanathan said, "The announcement on the PM Garib Kalyan Anna Yojana does not by itself mean anything for our fiscal consolidation path. We are still committed to that path; that decision does not throw us off that path."
Effective from Jan 1, 2024, the extension of the PMGKAY for 81.35 crore persons is estimated to cost Rs 11.80 lakh crore to the public exchequer over five years.
Expenditure concerns other than the additional economic cost towards the extension of free foodgrains under the NFSA ahead of the supplementary demand for grants include a higher subsidy on LPG, the nutrient-based subsidy rates on P&K fertilisers for the ongoing Rabi season, and the additional outgo for the Mahatma Gandhi National Rural Employment Gurantee Act.
Government spending could exceed by Rs 80,000 to Rs 1 lakh crore from the budget estimates for FY24, according to ICRA Ltd.'s Aditi Nayar, who sees 'low risk' of India breaching the fiscal deficit target at 5.9%. This could be matched by expenditure savings, which have ranged between an estimated Rs 1.1 and Rs 2.3 lakh crore in recent years, she said.
Finance Commission Chair Appointment 'Imminent'
The announcement on the members and chairman of the 16th Finance Commission is 'imminent', Somanathan said.
The commission is expected to submit its report by October 2025 for an award that will take effect on April 1, 2026. The finance commission is the constitutionally ordained body that determines the division of tax resources and grants between the centre and states.
On Wednesday, the cabinet approved the terms of reference of the 16th Finance Commission, which would cover a period of five years from April 1, 2026. The body typically takes about two years to make its recommendations and is empowered by the constitution to be formed every fifth year or earlier.
Commenting on whether the ToR is limited and if more will follow, Somanathan noted that it was prepared with the consultation of states.
"They are shorter than those of many recent commissions... I was part of a working group that was involved in drafting what finally got decided, and we took a lot of effort to consult the states. We have paid a lot of attention to their suggestions," he said.
Vivad Se Vishwas
A total of 43,904 claims have been settled by the Government of India against the MSMEs under the Vivad se Vishwas scheme, which helps settle contractual disputes between the government and government undertakings. The settlement is said to have totalled an approximate value of Rs 700 crore, the secretary said.
There are approximately 4,000 claims yet to be decided, but a majority have been decided, he said. "This has given substantial relief to a number of MSMEs and also makes them eligible for further credit and further supply, so it’s a very large number."
Vivad se Vishwas was announced in the 2023 Budget to provide relief to micro, small and medium enterprises that had difficulties performing their obligations under government contracts during the Covid period.
