States spending key to success of infrastructure plan 

Centre hopes states will absorb Rs 1 lakh crore of the Rs 7.5 lakh crore capex allotted in 2022-23, Finance secratary tells TNIE.

Published: 05th February 2022 07:30 AM  |   Last Updated: 05th February 2022 07:30 AM   |  A+A-

Finance Secretary TV Somanathan

Finance Secretary TV Somanathan

Express News Service

NEW DELHI:  Even as many cast aspersions on the government’s ability to exhaust the Rs 7.5 lakh crore capex allocation in 2022-23, the central government has high hopes from states to absorb the Rs 1 lakh crore capex allocation to states.

“Our expectation is that the states’ component of Rs 1 lakh crore would be exhausted. Our experience with states has been good so far. We allocated Rs 12,000 crore in 2020-21, that was fully spent. And in 2021-22, 97% of the Rs 15,000 crore has already been spent,” says Finance Secretary TV Somanathan in an interaction with TNIE.

Of the Rs 7.5 lakh crore allotted for capital expenditure in 2022-23, Rs 1 lakh crore has been provided for states to spend on infrastructure. This amount will be provided in the form of a 50-year interest-free loan.
Somanathan says that the states have a large appetite for it because in the present environment and even otherwise, states when they are cash constrained (as they have a lot of welfare responsibilities) the capital expenses become residual which receives the last flow of money.

Therefore, he believes that the amount allocated is easy for them to absorb and would reach execution level pretty fast. On why such a large jump in allocation to states - the allocation in the current financial year is Rs 15,000 crore (revised) - the finance secretary said that in the pre-budget consultative meeting with finance minister, the state chief ministers and finance ministers had said that the small amount that the Centre had provided in the previous two financial years were very helpful, and they wanted it to be continued and if possible enhanced.

The states, however, had not expected an enhancement of that magnitude, admits the finance secretary.
He says that apart from the Rs 1 lakh crore allocated to the states, Centres capex allocation has seen a 20% increase from Rs 5.5 lakh crore to Rs 6.5 lakh crore and that it can be spent within a year.

Financial services firm Nomura in its recent report has expressed doubts over the “the ability of the government” - both central and states - to spend 2.9% of GDP on capex, saying, it will face “execution hurdles”. It says identification of projects, on-the-ground implementation, coordination with different agencies - all typically lead to a smaller amount being spent than allocated. However, the finance secretary says the highway ministry, railways and even defence have enough ongoing projects which can be accelerated without too much of a problem.


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