Chennai: Revenue expenditure in FY24 has been lower by Rs 60,000 crore than the budgeted estimates. However, interest payments accounted for 30 per cent of revenue expenditure. The Economic Survey wants the private sector to increase their share in capital formation.
Between FY19 and FY23, the share of private non-financial corporations in overall GFCF increased only by 0.8 percentage points from 34.1 per cent to 34.9 per cent. This was mostly driven by their fast-increasing share in the additional stock of dwellings, other buildings, and structures. Their share in addition to the capital stock in terms of machinery and equipment, started growing robustly only since FY22, a trend that needs to be sustained on the strength of their improving bottom line and balance sheets to generate high-quality jobs.
However, India is amid a private capex upcycle that has been aided by government capital expenditure. Gross Fixed Capital Formation by private non-financial corporations increased by 19.8 per cent in FY23. There are early signs that the momentum in private capital formation has been sustained in FY24. Private investment across a consistent set of over 3,200 listed and unlisted non-financial firms has grown by 19.8 per cent in FY24.
Meanwhile, the total government expenditure for FY24 is lower by Rs 60,600 crore as compared to the budgeted estimates. This has not resulted in compromises on important areas of revenue spending, such as rural development and education, where allocation is significantly higher than budgeted estimates. There has been a marginal downward revision of budgeted expenditure on interest payments in FY24.
However, interest payments constitute 30.4 per cent of the revenue expenditure in FY24. The Economic Survey finds that a commitment to fiscal consolidation in the medium term, combined with revenues from asset monetization and privatisation, will be essential in reducing the share of interest payments in revenue expenditure to generate more fiscal headroom.
