The finance ministry believes that the government’s ambitious 5.5 lakh crore capex plan for 2021-22 (FY22), which is part of a strategy to try to revive growth by increasing infrastructure investment, will not be derailed by the second wave of the Covid-19 pandemic.
Under the condition of anonymity, a finance ministry official stated that because there will be no spending cuts on government departments this year and migrant labourers are expected to return to work due to a decrease in Covid-19 cases, the government does not expect a significant delay in restarting its infrastructure investment cycle.
“We don’t see any major delay and any short term delay can be recovered within the year. Resumption of activity this time will happen faster than last year. Once these lockdowns are over—may be in a month or two—I think there should be a quick resumption. This time the trains have not been stopped. Trains are still running. Migrants who go home can also come back quickly.”
The 5.5 lakh crore capex plan includes 1.4 lakh crore for defence and 4.1 lakh crore for non-defense sectors. Railways and roads are the two most important non-defense capex categories, accounting for 2.15 lakh crore.
In her FY22 budget speech, Finance Minister Nirmala Sitharaman stated that she has set aside more than 44,000 crore for projects that have made good progress on capital expenditure but require additional funding.
“Over and above this expenditure, we would also be providing more than ₹2 lakh crore to states and autonomous bodies for their capital expenditure,” she added.
However, Madan Sabnavis, chief economist at Care Ratings, believes that the pandemic-induced lockdown will have an impact on government revenues.
“GST collections have been very good in April but will come down in May for sure. Hence there will be pressure on balancing revenue and capex. Normally capex is weak till the end of monsoon as it is not possible to go ahead with construction projects which are affected by rains. Therefore, there will be more pressure to expedite projects such as in railways to ensure that there is a boost to infra. We may expect a pick-up mostly in the third quarter, with the second quarter capex being focused more on non-construction-based capex,” he added.
A query sent to the finance ministry went unanswered until the time of publication.
