Government will continue FY23 capital spending, capital investment needed for long-term growth: Finance Secretary Somanathan

Finance Secretary TV Somanathan. (File photo)

New Delhi: Finance Secretary TV Somanathan said the Center will not cut capital expenditure in the current fiscal year, mentioning that capital expenditure, or capex, is good for long-term economic growth and that short-term developments should not distract from this objective.
Many independent economists have suggested that fiscal policy should support monetary policy in the fight against inflation. Indian inflation based on the consumer price index (CPI) soared to 7.79% in April, an eight-year high. In a surprise move, the Reserve Bank of India (RBI) earlier this month raised the repo rate by 0.4 percentage points to 4.4% to contain inflation.

The Ministry of Finance has budgeted capital expenditure of Rs 7.5 lakh crore for FY23, against a revised investment of Rs 6.03 lakh crore for FY22.

“We will continue with committed capital expenditures,” Somanathan said. HEY in an exclusive interview.

The government has budgeted a budget deficit of 6.8% of gross domestic product for FY23, but with food and fertilizer subsidies expected to be much higher due to the war in Ukraine, the budget deficit is likely to exceed the target.

“If we reduce capital spending given the short-term problems, we will hurt long-term growth. This will impact projects committed in multiple sectors such as roads, railways,” he said. he told the daily, stressing that there will be no budgetary restrictions on capital spending.

Although the Center is in no mood to cut capital spending, fiscal policy in general will help the RBI keep inflation under control.

There could be a redistribution of some revenue spending, which will ensure that total spending does not increase significantly and harm the apex bank’s monetary policy, an official was quoted as saying by the daily.

“It’s not a dire situation. There could be some reduction in revenue spending, but not with the same intensity.

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