Large CPSEs are increasing their capital expenditure to revive investment

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Under constant leadership from the Ministry of Finance, major central public sector entities – corporations and enterprises – improved their capital expenditure (capex) in the first four months of the fiscal year in a bid to boost economic growth .

These entities have achieved 28% of their annual investment target through July of the fiscal year by spending Rs 1.85 trillion, according to official sources. During the same period last year, they had achieved approximately 23% of their annual target.

Public investment spending remains critical to the country’s post-Covid economic recovery, as private investment has remained elusive or limited to a few sectors. Improved performance by CPSEs and central government departments will somewhat offset lukewarm investments by state governments, some of which have been strapped for finance as a result of the Covid outbreak.

The Centre’s fiscal capital expenditure jumped 57% year on year in the first quarter of FY23 to Rs 1.85 trillion as it sought to accelerate productive spending, betting big on its high multiplier effect .

However, combined investment from twenty states, accounting for around 80% of the country’s gross domestic product (GDP), fell 9% year on year to Rs 55,057 crore in the June quarter, according to an FE analysis.

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At Rs 6.62 trillion, the FY23 investment target for large CPSEs forms a significant portion of the overall public investment target. The central government’s investment target was Rs 7.5 trillion (including Rs 1 trillion in long-term loans to states for asset creation) for FY23.

Railways and the National Highways Authority of India (NHAI), the two largest public sector investors, continued their investment momentum with nearly 50% growth between April and July, reflecting the Centre’s strategy to a revival of economic growth driven by investment.

The investment target for the 59 entities – 54 CPSEs and 5 departmental branches – with an annual investment of at least Rs 100 crore is set at Rs 6.62 trillion for FY23.

In April-July of the current fiscal year, railways were the largest investor among public sector entities. It spent Rs 59,831 crore, or 26% of its annual target of Rs 2.29 trillion, compared to Rs 40,000 crore, or 19% of its annual target of Rs 2.15 trillion, a year earlier. early. Railway investment is largely in laying new lines, doubling tracks, increasing traffic facilities, acquiring wagons and trains.

Next comes the NHAI. It spent Rs 59,728 crore in the April-July period, having reached 45% of the annual target of Rs 1.34 trillion, up from `41,000 crore or 34% of the annual target a year earlier . As such, the government is constructing highways to reduce travel time between major cities in the country.

Fuel retailer and refiner Indian Oil Corporation, which is increasing the capacity of several of its refining plants, has invested Rs 9,713 crore, or 34% of its annual target of Rs 28,549 crore for the April-July period. That’s more than it achieved a year earlier — 24% of the annual target.

ONGC, the leading CPSE player in the oil and gas exploration sector, has committed capex of Rs 8,200 crore in the first four months of the current financial year, or 28% of the annual target. NTPC invested Rs 7,300 crore in April-July 2022, or 32.5% of its FY23 target. Similarly, Coal India’s capital expenditure was Rs 4,330 crore during this period, or 26% of its target for FY23.

Driven by higher investments from the Center, States and public entities, the investment rate (gross fixed capital formation/GDP) in Q4FY22 was estimated at 33.6%, the highest in nine quarters.

A sustained push in investment spending by the government also comes at a time when the economy is facing new external headwinds and interest rates are being raised across economies to rein in inflation.

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