On Friday, Finance Minister Nirmala Sitharaman emphasized the need for a more efficient and timely rollout of capital investments by states. During a meeting focused on enhancing capital expenditure (capex), she directed Expenditure Secretary Manoj Govil to collaborate closely with state governments to expedite the submission and approval processes for project proposals. This initiative is crucial in ensuring that states can harness their allocated funds effectively and contribute to the nation’s economic growth.
The urgency for this directive stems from the recent reports indicating that, under the scheme for special assistance to states for capital investment, only ₹50,069 crore worth of projects have received approval in the first half of the financial year 2024-25. This figure starkly contrasts with the budgetary allocation of ₹1.5 lakh crore earmarked for the entire year, highlighting a significant gap in capital utilization. The finance ministry’s communication on X (formerly Twitter) underlined the pressing need for states to ramp up their project submissions to utilize the allocated funds adequately.
Under this specialized assistance scheme, the central government provides 50-year loans to states at zero interest rates, a move designed to encourage the creation of durable assets. While these loans represent a substantial opportunity for states to boost their infrastructure, there are conditions attached. States must undertake specified reform measures to access a portion of the capex loans, which are conditional in nature. However, a significant portion of the loans remains untied, allowing states some flexibility in their spending.
In her review meeting, Sitharaman expressed concern over the slow pace of capital investment and urged senior officials in the finance ministry to actively encourage states to implement the necessary reforms. She highlighted the importance of utilizing the full capex allocation, which plays a critical role in stimulating economic activity and enhancing public infrastructure. By reinforcing the need for timely project approvals and effective spending, the finance minister aims to catalyze development across various sectors.
This meeting was part of a series of consultations that Sitharaman has scheduled to assess capital spending and the resultant asset creation across different ministries. The session saw the participation of Economic Affairs Secretary Ajay Seth and other senior officials, who are instrumental in shaping the government’s fiscal policies and ensuring that financial resources are allocated efficiently.
The proactive approach taken by the finance minister reflects the government’s commitment to bolstering economic growth through enhanced capital investments. By working closely with state governments, the central administration aims to create a collaborative environment that fosters infrastructure development, ultimately contributing to the nation’s long-term economic resilience.
As India continues to recover from the economic impacts of recent global challenges, timely and effective capital investments will be vital in driving growth, creating jobs, and enhancing the quality of life for citizens. With the finance minister’s directives, there is hope that states will rise to the occasion and fully utilize the financial resources at their disposal, paving the way for a brighter economic future.