India May Miss ₹11.1 Trillion Capex Target For FY25, Inflation Remains Key Concern

India may fall short of its capital expenditure (capex) target of ₹11.1 trillion ($131.72 billion) for fiscal year 2024-25, a senior finance ministry official revealed on Wednesday. Economic Affairs Secretary Ajay Seth, speaking at an event in New Delhi, noted that while inflation due to food prices remains a concern, other inflationary pressures are under control.

Retail inflation hit a 14-month high in October, driven by rising prices of edible oils, onions, and tomatoes. Despite this, Seth reaffirmed the government’s growth projection of 6.5%-7% for FY25, with no downside risks expected.

Slow Progress on FY25 Capex Target

Government infrastructure spending, vital for sustaining India’s economic growth, has been sluggish this year due to national elections. Official data shows that between April and September, only 37% of the budgeted ₹11.1 trillion capex target was utilized. This is a decline from the 49% spent during the same period last year.

The slow pace of spending may hinder the government’s efforts to boost infrastructure development, a cornerstone of India’s rapid economic growth.

Measures to Accelerate Spending

To prevent a shortfall in India’s capex target for FY25, the government is reportedly considering relaxing quarterly spending limits. This move aims to ensure higher outlays in the latter half of the fiscal year.

Seth emphasized that the government remains optimistic about achieving its economic growth targets despite current fiscal challenges. However, food price inflation could pose risks to consumer spending and broader economic stability.

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