The government has subtly suggested a potential reduction in capital expenditure. Government insiders have revealed that states have been advised to fully utilize their unspent funds before seeking additional financial support.
The central government’s key message revolves around fiscal responsibility. States are strongly encouraged to carefully evaluate and exhaust their dormant funds before requesting further financial aid from the central government.
Furthermore, the government is actively working on managing its debt levels, aiming for reduced overall expenditure as a long-term objective. This approach aligns with the Finance Minister’s statement, emphasizing the importance of avoiding fiscal recklessness to prevent burdening future generations with excessive debt. However, the government’s avenues for achieving this objective are limited and primarily involve adjustments to expenditures at some point.
It’s essential to note that the central government might not be able to maintain the high rate of capital expenditure observed in the past two years. For example, the direct central government capital expenditure was approximately six lakh crore in FY22, but the budget allocates 10 lakh crore for this purpose. The actual figures will depend on the revised estimates (RE).
The central government is now indicating that sustaining such elevated levels of capital expenditure might not be realistic, emphasizing the need for increased private sector participation.
In terms of the current financial year, the government anticipates staying within the food subsidy budget. There might be a slight additional allocation for The Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA), but this will be done within the established fiscal limits. The central government remains committed to its fiscal deficit target of 5.9% for this financial year.