Government To Continue 50 Year Interest-Free Loans To States For Another Year

Finance Minister Nirmala Sitharaman on Wednesday  announced that the Centre will continue 50-year interest-free loans to state governments for one more year.She also said the enhanced capex of Rs 10 lakh crore for infrastructure development is at 3.3 per cent of the GDP.

FM said, “Capital investment outlay is being increased steeply for the third year in a row by 33 per cent to Rs.10 lakh crore, which would be 3.3 per cent of GDP. This will be almost three times the outlay in 2019-20.”  

Last year, the government had announced a capital outlay of Rs. 7.5 lakh crore for FY23. 

The Economic Survey 2023, which was presented on Tuesday, stated that between FY16 and FY22, the budgeted capital expenditure surged 2.7 times in the last seven years from FY16 to FY23. In the last 10 years, between FY12 and FY22, the total capital expenditure grew at an average rate of 13%. 

“The Capital Expenditure (Capex) of the central government, which increased by 63.4 per cent in the first eight months of FY23, was another growth driver of the Indian economy in the current year, crowding in the private Capex since the January-March quarter of 2022,” the Survey said.

“A sustained increase in private Capex is also imminent with the strengthening of the balance sheets of the Corporates and the consequent increase in credit financing it has been able to generate. A much-improved financial health of well-capitalised public sector banks has positioned them better to increase the credit supply,” it added.  

Cheering the allocated capital expenditure, rating agency CRISIL said the 33% increase in capital investment outlay using gross budgetary support will put India towards a Dollar 5 trillion economy. “The 33% increase in capital investment outlay using gross budgetary support, which has already a strong growth this fiscal, and grants of Rs 3.7 lakh crore are crucial for the infrastructure buildout needed to crowd in private investments and push India towards its Dollar 5 trillion economy goal,” CRISIL said.

The agency added the outlay will support the commercial vehicles industry and will be positive for multi-axle vehicles and tippers and will fast-track implementation of high-multiplier government programmes such as Bharatmala, Ghatishakthi, Parvatmala and Sagarmala. 

Apart from this, Sitharaman said the direct capital investment by the Centre is complemented by the provision made for the creation of capital assets through grants-in-aid to states. The ‘Effective Capital Expenditure’ of the Centre is budgeted at Rs.13.7 lakh crore, which will be 4.5% of GDP.

Sitharaman said the revised estimate of the total receipts other than borrowings is Rs. 24.3 lakh crore, of which the net tax receipts are Rs. 20.9 lakh crore. The revised estimate of the total expenditure is Rs. 41.9 lakh crore, of which the capital expenditure is about Rs. 7.3 lakh crore.

Meanwhile, extending support to the state governments, the government has enhanced an outlay of Rs.1.3 lakh crore. “I have decided to continue the 50-year interest-free loan to state governments for one more year to spur investment in infrastructure and to incentivize them for complementary policy actions, with a significantly enhanced outlay of Rs.1.3 lakh crore,” FM said.