AHMEDABAD: The Gujarat government could not meet the budgetary allocation for Capital Expenditure (CE) in any year during the five-year period (2017-22), according to the state finance audit report of the Comptroller and Auditor General of India (CAG) for the year ended March 31, 2022.
Capital expenditure refers to the part of the government’s expenditures that is designated for long-term investments in physical and financial assets. These expenditures are intended to create or improve assets that will give advantages over time, rather than being utilized for day-to-day operational expenses.
This expenditure includes infrastructure development, the creation of assets and social sector projects. However, the state finance audit report of CAG for the year ended March 31, 2022, stated that the state government could not meet the budgetary allocation for CE in any year during the five-year period (2017-22).
Himani Baxi, Assistant Professor of Economics at PDEU University, Gandhinagar, said: “If CE is lowered, or not used, it cannot produce an asset; because of this employment generation is also lowered; and if people do not obtain jobs, how will they spend? Therefore capital expenditure has multiplier effects.”
According to CAG’s State finance audit report, Gujarat’s CE increased from Rs 26,313 crore in 2017-18 to Rs 28,185 crore in 2021-22.
Of the total CE of `28,185 crore incurred in 2021-22, indicating a rise of growth rate of 7.11 %. The CE rose by 5.24 % between 2020-21 and 2021-22. Considering the inflation rate of 4.9% for the year 2021-22 the net increase is only 0.34% (according to the Handbook of Statistics on Indian States, RBI November 2022).
The capital expenditure (CE) to Total Expenditure (TE) ratio has decreased from 18.15% in 2017-18 to 14.86% in 2021-22. Furthermore, the share of CE in state GDP has been dropping. It declined from 1.98% in 2017-18 to 1.45% in 2021-22.
Assistant professor of economics of St. Xavier College, Ahmedabad, Atman Shah said “The government expects to spend ₹ 1152.35 crore on education in 2021-22. However, only half of this sum, ₹ 606.33 crore, was spent. According to the CAG report, the State Government was unable to satisfy the budgetary allocation for Capital Expenditure in any year during the five-year period (2017-22).”
“The increase in health capital expenditure is offset by a decrease in education spending. However, the fiscal allocation for education and health has increased significantly in 2022-23 and 2023-24. However, how much the government will actually spend is a matter of concern.” Atman Shah said
Prof Himani Baxi explained the loss of capital expenditure saying, “It also affects Social development and physical infrastructure development, it also affects GDP growth rate when you fail to build good state highways, once Capital expenditure incurred on the physical infrastructure, so you are able to build either less physical infrastructure, so your GDP growth might have suffered, but in the last five years how much it effects on Gujrat GDP is difficult to say due to Covid period.”
“When Capital expenditure incurred on social infrastructure like making hospitals and schools sanitation when it cut down it affects social developments,” she added