Capex trend reverses in H1 FY25; Rly, highway spending dips

For the first time since the government accelerated infrastructure spending in 2021 to boost the economy after Covid, absorption of budgeted capital outlay by the ministries has exhibited a downward trend. 

In the first half of the current financial year (April-August), cumulative capital expenditure by central ministries has come down to ₹4.15 lakh crore, registering a 15.71% decline compared with ₹4.90 lakh crore during the corresponding period of the previous financial year.

At ₹4,14,966 crore, capital expenditure done by the central ministries till September this year is 37.35% of the budget estimate of ₹11,11,111 crore for FY25. It may be noted that in the corresponding period of the previous fiscal, the central ministries had utilised 49% of the budget estimate of ₹10 lakh crore for the previous fiscal.

Highways, Railways slip  

The ministry of highways and the ministry of railways, which had been the key fulcrum of the government’s capital expenditure programme, too have shown slippages as per data from the government. Total capital spending by both has come down by about ₹22,000 crore till August this year.

As per finance ministry data, the ministry of road transport and highways spent ₹1,40,559 crore in H1 FY25, compared with ₹1,56,383 crore during the corresponding period of the previous financial year. The budget estimate for highway capex this year is ₹2,72,241 crore.

Similarly during the period, the railway ministry spent ₹1,35,698 crore compared with ₹1,42,602 crore during April September period of 2023-24. Railways has been allocated a budget of ₹2,52,000 crore in the current financial year.

The question, however, is what the reason behind the dip is. A source points out that while the ministry of highways is awaiting government's nod to revise cost in projects under Bharatmala before it can roll out the tenders, the ministry of railways is in the process of sanctioning the economic corridors identified by it following the Budget announcement.

“Since railway network expansion corridors are greenfield projects with new alignments, identifying and sanctioning projects is currently being done,” says a ministry source. In the budget this year, finance minister Nirmala Sitharaman announced three economic corridors for network expansion of Indian railways. Those being energy, mineral, and cement corridors, port connectivity corridors, and high traffic density corridors. The corridors will enhance the current network of 67,000 kms to over one lakh kms by 2030.

Other big laggards

That said, both highways and railways are still chugging ahead. But telecom and defence have been major laggards in terms of poor utilisation of capex allocation to them.

These blips in the capital expenditure utilisation by the ministries seems to have been the trigger behind finance minister Nirmala Sitharaman undertaking a review with highways, railways and telecom ministry in September. During the reviews, Sitharaman urged ministries to set up quarterly targets and ensure they are achieved within a stipulated time frame. She exhorted the respective ministries to expedite implementation and make up for the first and second quarter target in Q3 FY2025 itself.