["(A) closer look at the Budget documents suggests that the impressive jump may be largely a case of smokes and mirrors. "Here's what the numbers show. The 25.4% rise is actually over the Budget estimates (BE) for 2016-17, while the increase over this year's revised estimates (RE) is a much more modest 10.7%. Even more significantly, a considerable chunk of it may be just a reclassification of some spending from revenue expenditure seen broadly as non-asset creating to capital expenditure." (The above quote is taken from the ET report/analysis reproduced below, and highlighted therein.)
"Capital expenditure" is supposed to be the amount spent on new asset creation - and thereby an indicator of "development", while "revenue expenditure" relates to the expenditure incurred in maintaining the system. (And a cut in "revenue expenditure" is often projected as a rise in "efficiency".) Hence, the temptation to show a higher figure for "capital expenditure".] Budget 2017: Why 25% hike in capital spend is actually only 11% By TNN | Updated: Feb 03, 2017, 01.06 PM ISTPost a Comment During his Budget speech on Wednesday finance minister Arun Jaitley said he had stepped up, capital expenditure broadly spending on creating assets by 25.4% in 2017-18 over the previous year. He went on to add that "this will have multiplier effects and lead to higher growth". But ***a closer look at the Budget documents suggests that the impressive jump may be largely a case of smokes and mirrors.*** [Emphasis added.] ***Here's what the numbers show. The 25.4% rise is actually over the Budget estimates (BE) for 2016-17, while the increase over this year's revised estimates (RE) is a much more modest 10.7%. Even more significantly, a considerable chunk of it may be just a reclassification of some spending from revenue expenditure seen broadly as non-asset creating to capital expenditure.*** [Emphasis added.] That is why an apples to apples comparison in this case must be between the RE for the current year and the budgeted amount for next year. The BE for 2016-17 pegged total capital spending at Rs 2.47 lakh crore. In the RE for the year, the figure has risen to Rs 2.8 lakh crore, an increase of about Rs 33,000 crore. It's not often that the government ends up spending more than it budgeted on the capital account, so how did this happen? The single largest jump in capex between the BE and RE for the current year is in the road transport and highways ministry. Capex for this ministry, the Budget document entitled "expenditure profile" shows, was budgeted at just Rs 17,453 crore, but has shot up to Rs 41,103 in the RE. Interestingly, the revenue expenditure figures dropped even more sharply from Rs 40,523 crore in the BE to Rs 11,344 crore in the RE. As a result, total spending actually was lower in the revised estimates, but capex looked far more impressive. Digging deeper into the "demands for grants" shows that this flip between revenue expenditure and capex figures was concentrated in the allocation for roads and bridges. In the BE, this had a revenue expenditure of almost Rs 42,000 crore, but in the RE this was down below Rs 7,000 crore. In contrast, the capex figure was up from just under Rs 50,000 crore in the BE to nearly Rs 72,300 crore in the RE. Sources TOI spoke to confirmed that this was essentially a reclassification issue stemming from the move to do away with Plan and nonPlan categorisation. What does this mean for the larger Budget numbers? If we were to add around Rs 20-25,000 crore to the revenue deficit for RE 2016-17 and about Rs 25-30,000 crore to that for BE 2017-18, the revenue deficit would go up from 2.1% and 1.9% respectively of GDP to 2.2 and 2.1%. -- Peace Is Doable -- You received this message because you are subscribed to the Google Groups "Green Youth Movement" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To post to this group, send an email to [email protected]. Visit this group at https://groups.google.com/group/greenyouth. For more options, visit https://groups.google.com/d/optout.
