India eases norms for capex above Rs500cr to boost spending

NEW DELHI: The Finance Ministry has eased regulations for expenditures exceeding Rs500 crore to speed up capital expenditure (capex), which is targeted at Rs11.11 trillion for the current fiscal year.

The move aims to boost government spending, which had slowed down due to the recent general elections.

In the Budget, Finance Minister Nirmala Sitharaman proposed increasing the capital expenditure target by 11.1 per cent to a record Rs11.11 trillion for 2024-25. To ensure smooth execution of the Budget, the ministry has decided to relax rules for large releases over Rs500 crore for all expenditure items this fiscal year, according to an office memorandum dated September 2, 2024.

Relaxation comes with a caveat

However, the relaxation comes with a caveat that all ministries and departments must strictly adhere to the guidelines of the Single Nodal Agency (SNA)/Central Nodal Agency (CNA), as well as the Monthly Expenditure Plan (MEP) and Quarterly Expenditure Plan (QEP) ceilings.

Previously, a May 2022 memorandum required tracking of expenditure and cash flow for releases between Rs500 crore and Rs2,000 crore. Such releases were to be scheduled between the 21st and 25th of each month to align with Goods and Services Tax (GST) inflows.

Similarly, large expenditures over Rs2,000 crore were to be timed for the second half of the last month of the quarter to coincide with direct tax receipts. These conditions have now been lifted.

Additionally, Financial Advisers are instructed to review and finalize the timing of dividend receipts and other non-tax revenues for their respective ministries and departments. Dividend payments and buyback considerations are to be targeted within the first half of the financial year.