November was the second straight month of falling Capex. In October, Capex fell to Rs 23,919 crore from Rs 57,483 crore in September.
Despite the government바카라s insistence on pushing capital expenditure (Capex) in order to fast track economic growth, data released recently paints a different picture. India바카라s capital expenditure in November was at Rs 20,360 crore compared to Rs 43,803 crore in the same period a year ago, falling more than half on a yearly basis.
November was also the second straight month of falling Capex. In October, Capex fell to Rs 23,919 crore from Rs 57,483 crore in September. October Capex fell 24.11 per cent year-on-year. In the first two months of FY22바카라s third quarter, the government바카라s expenditure dropped 41.21 per cent to Rs 44,279 crore compared to Rs 75,322 crore in the same period a year ago.
And now with India in the middle of the third wave of the Covid-19 pandemic, efforts to spur growth might get derailed yet again. The Omicron variant of the coronavirus has forced central and state governments to impose fresh sets of curbs, restrictions, and shutdowns, which would expectedly impact the growth numbers of the fourth quarter.
In case of the private sector, most companies meet their Capex targets in the last quarter and start invoking investments. But private sector spending has been weak due to the lack of demand across sectors. 바카라Now, on account of the third wave, it is possible that these get deferred. There바카라s already a strong possibility of slowing sales, in which case investment decisions would get deferred to next year because of the uncertainty,바카라 Madan Sabnavis, chief economist Bank of Baroda, said.
According to Sabnavis, the Centre바카라s targets are expected to remain on track but for states, it would depend on their revenue positions. In order to incentivize states to spend more, the Centre had announced that states would be allowed to make additional borrowings to the tune of 0.5 per cent of their gross state domestic product (GSDP) if they succeed in achieving at least 15 per cent of FY22바카라s Capex target by the first quarter, 45 per cent in the second quarter, 70 per cent in the third, and 100 per cent at the end of the fiscal year.
바카라If their revenues are not buoyant, they usually defer it (Capex) to the fourth quarter. If revenue continues to be weak, it is possible they would cut back on discretionary spending, i.e., Capex. Because of Omicron and the lockdowns that the states are now imposing, there could be a slowdown in the overall spending and revenue of the states,바카라 Sabnavis said.
According to Sabnavis, there has been a fall in capital expenditure in the current financial year. 바카라The recent announcement of Capex by CMIE (Centre for Monitoring Indian Economy) shows that in Q1, Q2, and Q3 compared to last year바카라s there바카라s been a drop, especially in Q2 and Q3. Meaning corporate sector investments are low-key this financial year. Demand hasn바카라t picked up to that extent across all sectors,바카라 Sabnavis said.
He said that the state governments, too, are yet to be on track as far as spending is concerned. 바카라Even though state governments are allowed to run 4 per cent of their fiscal deficit, typically it바카라s a habit among states to go slow on capital expenditure because it바카라s discretionary part of expenditure. Capital expenditure generally increases in the fourth quarter,바카라 Sabnavis said.
According to Sanjay Kumar, partner Deloitte India, 바카라Omicron will definitely impact (spending) to an extent, but if there is no national lockdown, the impact would not be as severe. But if Omicron assumes the proportions of the second wave as seen in the March-June period last year, the impact would be far more drastic.바카라
India Ratings and Research (Ind-Ra) said that the Omicron wave would have an adverse impact on FY22 fourth-quarter GDP. 바카라Ind-Ra바카라s estimate shows that GDP growth in 4QFY22 will now come in at 5.7% YoY, which is 40bp lower than the agency바카라s earlier estimate of 6.1%. For the entire FY22, the GDP is expected to clock a growth rate of 9.3% YoY, 10bp lower than our earlier estimate of 9.4%,바카라 it said in a statement.
Devendra Pant, chief economist Ind-Ra said that chances of a nationalized lockdown due to Omicron was unlikely. 바카라What we have seen till now are localized and regional movement restrictions. Which would impact consumption,바카라 Pant said.
The central government has been urging ministries to up their spending. Finance minister Nirmala Sitharaman had in June asked public-sector undertakings of railway and power sectors to meet the Capex targets outlined in the budget. The FM has also been reported to have pulled up infrastructure ministries for poor Capex performance. In a letter to railway minister Ashwini Vaishnaw, Sitharaman pointed out that the railways had spent only 61 per cent of budget targets till November 2021. Among the infra ministries, power ministry바카라s capital expenditure was 7 per cent, road, transport, and highway ministry바카라s was at 68 per cent, telecom department바카라s was at 12 per cent, and ministry of housing and urban affairs바카라 was at 66 per cent, according to data from Controller General of Accounts.
바카라The YoY halving in the capital spending of the GoI in the month of November 2021 is disappointing, even though it can partly be attributed to interruptions related to the festive season. After crossing a healthy Rs 57,000 crore in September 2021, capital outlay has fallen sharply in the subsequent two months,바카라 Aditi Nayar, chief economist ICRA, said.
Nayar said with a substantial 15 per cent expansion in revenue expenditure offsetting the sharp contraction in capital spending, the Centre바카라s total expenditure has logged a rise of only 5 per cent in Oct-Nov 2021, compared to a 21 per cent uptick in the second quarter of FY2022.
바카라The subdued rise in the GoI's spending so far does not augur well for the pace of GDP growth in Q3 FY2022, although expedited transfers to the states may provide some support,바카라 Nayar said.
Centre바카라s spending-intensive ministries like roads, railways and urban development had mostly spent as per the targets, according to Sabnavis.