HomeWhat's TrendingGovernment Emphasises Shorter-Term Projects for Infrastructure Growth

Government Emphasises Shorter-Term Projects for Infrastructure Growth

The government is planning to invest in shorter-duration projects to fully utilise the highest-ever capital expenditure allocated in the interim budget for accelerating the development of the country’s infrastructure, according to Finance Minister Nirmala Sitharaman.

Sitharaman highlighted that while many capital expenditure (capex) projects have long gestation periods ranging from 24 to 36 months or even longer, monitoring by the finance ministry revealed that projects tend to be most effective when the capex is utilised within 12 months.

The interim budget has increased central capex allocation by 11.11% to ₹11.11 trillion for the upcoming fiscal year, aiming to fund infrastructure projects starting from April 1. However, despite the increase in capex for FY25, the growth rate is slower compared to previous years. Sitharaman explained that this slowdown is not due to the reduced absorption capacity of implementing agencies but rather because capex levels were already high and would now see a proportionate increase.

She emphasised that private-sector investment is showing signs of growth in sectors like renewables and those under productivity-linked incentive (PLI) schemes. However, investment in traditional sectors like cement and steel is yet to pick up.

Additionally, Sitharaman noted an increase in capital expenditure by states, demonstrated by the rise in central credit available to them under the 50-year interest-free special assistance scheme to ₹1.3 trillion. She indicated that states may use this scheme to complete projects where substantial progress has already been made using funds from the central government over the past two years.

Overall, the government’s focus on investing in shorter-duration projects aims to expedite infrastructure development while ensuring efficient utilisation of allocated funds.

Monika Shanmugam