In a significant move to stimulate the economy, the Indian government has recently announced a relaxation in the norms governing public expenditure for the fourth quarter (January-March) of the current financial year. This relaxation specifically applies to expenditures exceeding Rs 500 crore. The Finance Ministry issued instructions regarding this through an office memorandum.
The relaxation is primarily aimed at providing a boost to public expenditure, which is seen as a crucial factor in driving economic growth. This move is in line with the government’s efforts to enhance capital expenditure and stimulate economic activities.
In the first half of the current fiscal year, capital expenditure by central public sector enterprises (CPSEs) reached approximately 52 percent of the budget target, amounting to Rs 3.79 lakh crore. This figure is a significant increase compared to the same period in the last fiscal year, where the expenditure was about Rs 2.85 lakh crore or 43 percent of the budget estimates.
The Finance Ministry’s decision is based on the expectation that the country’s GDP growth rate for the fiscal year 2023-24 will comfortably exceed the earlier forecast of 6.5 percent. This optimism is fueled by the GDP growth performance in the second quarter, which was higher than expected at 7.6 percent. Additionally, the Ministry’s half-yearly economic review report suggests a declining trend in headline inflation, aided by a stable downward movement in core inflation and continuing deflation in fuel inflation.
The Reserve Bank of India (RBI) has projected the average inflation rate to be around 5.4 percent for FY24. The Ministry’s report also acknowledges the risks to growth and stability, mainly emanating from external factors, while highlighting India’s promising external sector outlook.
This relaxation in expenditure norms is seen as a critical step in maintaining the momentum of economic growth, as India continues to recover from the impacts of the pandemic and navigate through global economic challenges.