Boosting productive spend, challenge for next government: CRISIL

India Infoline News Service | Mumbai |

The new government that will take charge next month must aim to raise the Centre’s productive spending.

The 13th Finance Commission, which is now in its terminal year, had set the Central government a capital expenditure to GDP target of 4.5% to be achieved by fiscal 2015. What has actually been achieved is less than half of the target.  The ratio for fiscal 2014 was 1.7% and the same is budgeted for fiscal 2015.

Even if revenue grants provided by the Central government for capital creation to the states are added to the Centre’s capital expenditure, the Central government’s total budgeted spending for productive purposes will only be 2.8% in fiscal 2015.
 
Over fiscals 2013 and 2014, in terms of per person spending, the government only spent an incremental Rs 110 on productive spending (capital expenditure and the revenue grants for capital creation), while it spent an additional Rs 1,900+ per person on other expenditure.
 
The new government that will take charge next month must aim to raise the Centre’s productive spending and close the gap between the 13th Finance Commission target on capital expenditure and the actual productive spending. To fund this higher capital spending, the government will have to improve its revenue position by implementing tax reforms such as GST.
 

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