Rama Krishna Sangem
Narendra Modi led government at the Centre is keen on injecting more capital expenditure – Capex- to boost the economy. The Centre has eased several norms to expedite the release of interest-free capital expenditure (capex) loans to states, aiming to ensure the full utilisation of the Rs 1.5 trillion allocated for FY25.
The initiative aims to counter the decline in public capex and address potential shortfalls in budgeted capital spending, according to a report by Financial Express. The government’s move seeks to offset a possible gap in actual capex, which was pegged at Rs 11.1 trillion for FY25. By the end of November, only Rs 5.13 trillion had been spent, reflecting a year-on-year decline of 12.3 per cent.
The report quoted a senior government official as saying that the Centre will achieve 100 per cent of the target set for capex loans to states this financial year. As of now, Rs 90,000 crore — two-thirds of the total outlay — has been disbursed. In comparison, only Rs 61,500 crore was released during the same period in FY24.
Funds linked to reforms
Out of the Rs 1.5 trillion, Rs 95,000 crore is tied to reforms and state-level performance in areas such as industrial growth stimulation, infrastructure project completion, and land reforms. The remaining Rs 55,000 crore consists of untied funds, which states can allocate to their priority projects.
As of now, Rs 90,000 crore — two-thirds of the total outlay — has been disbursed. In comparison, only Rs 61,500 crore was released during the same period in FY24.
Allocation linked to reforms ; Out of the Rs 1.5 trillion, Rs 95,000 crore is tied to reforms and state-level performance in areas such as industrial growth stimulation, infrastructure project completion, and land reforms. The remaining Rs 55,000 crore consists of untied funds, which states can allocate to their priority projects.
Additionally, states that fully utilise their untied allocations can qualify for extra funding — 100 per cent of their original allocation for North Eastern and hill states, and 50 per cent for other states — on a first-come-first-serve basis.
New criteria for ‘tied’ loans
The government has relaxed some conditions under the tied component of the capex loans, particularly those related to states’ own capex growth. Originally, Rs 25,000 crore was earmarked as an incentive for states that achieved more than 10 per cent annual capex growth in FY24 and in the first half of FY25. The new rules also reward states that achieve a 10 per cent capex growth in Q2 and Q3 (July–December 2024) or in the first three-quarters of FY25, compared to the corresponding periods in FY24.
