Centre eyes 95% of undershot capex target for FY25: Ajay Seth

New Delhi: The government’s capital expenditure (capex) for FY2025 is projected to align closely with last year’s spending, at around 95% of the allocated target, though the target itself may be undershot, Ajay Seth, secretary of the department of economic affairs (DEA) said on Wednesday.

“On capex, there might be some undershooting, but spending will be more than last year. Last year, we spent 95% of the allotted capex, and this year it is likely to be the same—95% of the target,” Seth said at a curtain raiser event for industry body FICCI's 97th AGM and Annual Convention.

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In FY2024, the government spent 95% of the ₹10 trillion capex allocation, revised to about ₹9.50 trillion later. The spending came to ₹9.49 trillion.

For FY25, the Centre boosted its capital expenditure by raising the allocation on developing infrastructure projects to  ₹11.11 trillion, building on increases in recent years to spur economic growth.

According to Seth, the Centre is expected to utilize about ₹10.55 trillion of the capex in FY25.

Capex spending slows

The Centre's capex spending slowed down during Q1, FY25, primarily due to the general elections.

According to India Ratings, the Centre’s capex contracted 35% year-on-year in Q1, FY25 to ₹1.8 trillion, while states’ capex declined by 21% to ₹0.8 trillion.

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During Q1, FY25, private final consumption expenditure (PFCE) and gross fixed capital formation (GFCF), at constant prices, grew 7.4% and 7.5% respectively.

PFCE is the expenditure incurred by resident households and non-profit institutions serving households (NPISH) on the final consumption of goods and services, whether made within or outside the economic territory.

GFCF indicates how much of the new value added in an economy is invested rather than consumed.

No downside risks

Seth expressed confidence in the Economic Survey 2024-25's projected growth rate of 6.5-7%, saying he sees no downside risks to achieving it.

Apart from the Central government, the Reserve Bank of India (RBI) projects India's GDP growth to be 7.2% for FY25.

Seth added the government is working on mobilizing a ₹1 trillion fund for incentivizing research and development in the private sector, announced in the budget earlier this year, which is likely to be operationalized in the coming month or two before the upcoming budget in February.

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The fund—called the Anusandhan National Research Fund—aims to support basic research and prototype development to bridge the gap between research and industry, and stimulate private sector-led innovation on a commercial scale.

Meanwhile, defence secretary Rajesh Kumar Singh, speaking at the same event said he expected more private investments into research and development and a heightened focus on Indian intellectual property rights.

"Engines for many machines are designed abroad, still," he said, adding that industry should prioritize indigenous manufacturing.