Federal government spending slowed during April-June due to the national elections, with total expenditure in six months through September at about 44% of the full-year target.
Analysts say the weaker spending is one of the reasons for a recent slowdown in India’s high frequency economic indicators.
India’s industrial output dropped for the first time in nearly two years in August but is expected to grow 2.5% in September, according to a Reuters poll.
“Capital expenditure will pick up in the coming months, and we will ensure as much as possible capex happens in January-March,” said the government source, who declined to be named as they are not authorised to speak to media.
The finance ministry did not immediately respond to a Reuters request for comment. Capital expenditure, or spending on building physical infrastructure, was at 4.15 trillion rupees ($49.18 billion) during April-September, or 37% of the annual target, against 4.9 trillion rupees a year earlier. The government targets capital expenditure at a record 11.11 trillion rupees in the fiscal year ending March 31.
The government is unlikely to alter its market borrowing for the fiscal year 2024/2025, as the plan was firmed up considering the higher redemption of loans availed during the COVID-19 pandemic, the source said.
This would also impact the gross borrowing in 2025/26, which may see a spike due to repayments even as the net borrowing may not be as high, the source said.
The government aims to borrow a gross amount of 14.01 trillion rupees through bonds in the current financial year.
In fiscal year 2021, India borrowed 12.6 trillion rupees, up from 7.1 trillion rupees in the previous year as revenues dried up due to lockdowns. Borrowings have remained elevated since then.