Took capex route for multiplier effect: Nirmala Sitharaman

The finance minister said that every Rs 1 spent on capex has a multiplier effect of Rs 2.45 worth of multiplier in the immediate year, and Rs 3.14 worth of effect in the following years.

Published: 12th February 2022 08:45 AM  |   Last Updated: 12th February 2022 08:45 AM   |  A+A-

Finance Minister Nirmala Sitharaman.

By Express News Service

NEW DELHI: Finance minister Nirmala Sitharaman on Friday told the parliament that the government opted for spending through the capex route because of the high multiplier effect it has on the economy.

Responding to debate on the Budget in the Rajya Sabha, the finance minister said that every Rs 1 spent on capex has a multiplier effect of Rs 2.45 worth of multiplier in the immediate year, and Rs 3.14 worth of effect in the following years.

On the other hand, she explained that every Rs 1 spent in revenue expenditure gives 45 paise multiplier effect in the immediate year, and in the year next it gives an additional 10 paisa multiplier. “So spending through revenue expenditure does not give the much needed multiplier effect in the economy. Therefore, to sustain growth, we had to choose to spend on public capital expenditure,” she said in her response.

The opposition has criticised the government for not allocating much to sectors like health and education. The government has increased the capex allocation for FY23 by 34.5% to Rs 7.5 lakh crore from Rs 5.5 lakh crore in FY22.  However, of the Rs 7.5 lakh crore, Rs 1 lakh crore has been set aside for states in the form of 50-year loan.

The government has allocated Rs 1.04 lakh crore to health in 2022-23 against Rs 93,224 crore in the previous year. Health had got Rs 86,606 crore against an allocation of Rs 74,602 crore in 2021-22. Allocation to Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) has been kept at Rs 72,000 crore same as last year’s budget. Though, the allocation in 2021-22 had to be revised to Rs 97,000 crore.

On the criticism for not giving higher allocation to MNREGS, the finance minister said that MNEGS is a demand driven scheme, and the allocation would be increased if there is more demand for jobs in rural areas under the scheme.



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