Govt keeps tabs on capex as private investment lags
NEW DELHI: Govt is keeping a close watch on capex as private investment remains weak, some of which may be on account of the global uncertainty induced by the US President Donald Trump's tariff regime.
During April-May, Centre's capital expenditure has been higher with ministries and departments spending 20% of their allocation for the year, compared with 13% in the first two months of the last fiscal year. Over the last five years, capex by the Centre has been a key policy tool to boost investment in the economy with the expectation that the multiplier effect will generate demand for inputs and create jobs and spur private investment.
The private sector has, however, largely watched from the sidelines barring sectors such as cement and steel where companies are lining up investment to meet the demand created by public investment in roads & railways. There has been heightened activity in sectors such as electronics, induced by schemes such as PLI.
But overall capacity utilisation is not seen at levels where companies would ramp up investment to set up new production lines.
In sectors such as automobiles and energy, the shift towards greener technologies is resulting in some investments being held up, industry sources said. While acknowledging the weak private investment, govt sources said efforts are being made to understand the measures that may be needed to boost activity.
Further, the sources said, some of the central projects may not have more absorptive capacity to step up capex and govt may explore newer segments of the economy to divert more public investment.
These could include spaces such as urban infrastructure with the finance ministry and other wings of govt expected to hold discussions in the coming months.
Given the needs of the economy and the growth expected in coming years, the focus on capex is going to remain, with private sector expected to take the baton sooner or later.
For the current fiscal year, the Centre has budgeted for capex of Rs 11.4 lakh crore of which nearly half is allocated to roads and railways.
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