Chennai: The Centre could miss the gross capex target for FY25 by Rs 70,000 crore mainly due to lower spending in defence, roads and highways, and railways in the first half.
As per the revised budget estimate for FY25, the central government has set a gross capex target of Rs 11.1 lakh crore. ICRA has estimated that the government has spent Rs 4.15 lakh crore as capex in the first half of the fiscal year. This is 15.4 per cent down from the capex spend of Rs 4.95 lakh crore in H1 FY24.
“The YoY moderation in gross capex in H1 FY2025 stemmed from the decline in capital outlay on defence services, which was down by 15.2 per cent and that by the Ministry of Road Transport and Highways by 10.1 per cent. Capex by the Ministry of Railways witnessed a contraction of 4.8 per cent in this period,” Aditi Nayar, chief economist, of ICRA, told the Financial Chronicle. Apart from the capex spent by these three ministries, the remaining capex too was down by 33.9 per cent in H1 FY2025, partly led by the lower offtake by states under the interest-free capex loan scheme.
Given the current trends, it appears unlikely that the government will be able to meet the FY2025 capex target, ICRA said. “At this juncture, ICRA expects the capex target of Rs. 11.1 lakh crore for FY2025 could be missed by a margin of around Rs. 70,000 crore,” said Nayar.
In order to meet the FY2025 revised budget estimate, the government needs to incur a capex of Rs 1.16 lakh crore a month during H2 FY2025, which entails a considerable YoY expansion of 52 per cent against H2 FY2024. In H2 FY2024 the government spent Rs. 4.58 lakh crore.
In H2 FY2025, capex by all these ministries needs to grow in double digits - Ministry of Defence by 30.2 per cent, Railways by 16.3 per cent and Road Transport and Highways by 22.5 per cent to meet the target.
Further, the remaining capex spend also has to double to Rs. 3.3 lakh crore in H2 FY2025 from Rs. 1.6 lakh in H2 FY2024, which seems quite ambitious.
The amount transferred to states eased to Rs. 379 billion in H1 FY2025 from Rs. 600 billion in H1 FY2024, probably due to the slow progress of disbursals under the interest-free capex loans to the state governments. The target on this account was Rs 1.5 lakh crore in FY2025 and given the large headroom of Rs 1.2 lakh crore, there could be a shortfall under this head.
