Centre approves Rs 56415 crore for 16 states under capex scheme

  • June 27, 2023
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Centre approves Rs 56415 crore for 16 states under capex scheme

Subject : Economy

Section: Fiscal Policy

Context: Finance Ministry has approved investments worth Rs 56,415 crore across 16 states for the ‘Special Assistance to States for Capital Investment 2023-24’ scheme

Key points:

  • Under the scheme investments will be made in sectors such as health, education, power, roads, railways and irrigation. The scheme provides a 50-year interest-free loan up to Rs 1.3 lakh crore to state governments.
  • The outlay also includes the state share of two projects, namely Jal Jeevan Mission and Pradhan Mantri Gram Sadak Yojana under this scheme.
  • The ministry has divided the scheme into eight parts.
    • Part-I: Rs 1 lakh crore has been allocated to States in proportion to their share of central taxes and duties.
    • Part-II: Allocation of Rs 3,000 crore incentives for scrapping of vehicles, including state government vehicles and ambulances. The funds will also be used to waive liabilities on old vehicles, provide tax concessions to individuals for scrapping of old vehicles and set up of automated vehicle testing facilities.
    • Parts III & IV: Focuses on incentives to states for reforms in urban planning and finance. For the same, Rs 15,000 crore and Rs 5,000 have been set aside respectively.
    • Part-V: Rs 2,000 crore is set aside in order to increase housing stock for police personnel and their families
    • Part-VI: The government has earmarked an amount of Rs 5,000 crore under Part-VI to build “Unity Mall” in each state. The idea is to strengthen the concept of ‘Make in India‘ and ‘One District, One Product‘.
  • The top recipients are: Bihar, MP, West Bengal, Rajasthan, Odisha. The bottom recipients are: Goa, Sikkim, Mizoram, HP, Haryana
 What is the Capex scheme?

  • The capex scheme’s official name is ‘Special Assistance to States for Capital Investment’ was introduced in FY 2022-23, with the aim to strengthen the hands of the States in the spirit of cooperative fiscal federalism,
  • Involves providing financial assistance to the States for capital expenditure, in FY 2023-24, the outlay is of Rs.1.30 lakh crore.
  • The funds under the scheme are either linked to reforms or are for sector specific projects.

Why Capital Expenditure matters

  • Government makes expenditures under Revenue and Capital heads.
  • Of the two it is Capital expenditure that aids future growth of the economy, as the money spent gives returns in the future.
  • Capital expenditure is expenditure towards, health, education, irrigation, water supply, power, roads, bridges etc.
  • Major components of revenue expenditure include interest payments, major subsidies, pay and allowances of government employees, pensions, defence revenue expenditure, and transfers to States in the form of Finance Commission grants, Centrally Sponsored Schemes, etc. Grants to Central autonomous bodies are a substantial part of the Central Sector schemes. These do not aid future growth of the economy.
Budget at a Glance           BE 2023-24
Revenue expenditureInterestSubsidyPensionTotal
Rs. 10.80 lakh crore (30.8 % of total)Rs.3.75 lakh crore (1.2 per cent of GDP)Rs.2.34 lakh croreRs. 35.02 lakh crore
Tax devolution to the States (15th Finance Comm.)Rs. 10.21 lakh crore

 

Revenue Deficit GrantsRs. 1.65 lakh crore
Capital expenditureRs.10 lakh crore
Total ExpenditureRs. 45.03 lakh crore
Centre approves Rs 56415 crore for 16 states under capex scheme economy