Punjab’s capex up 40% in April-Nov but may still fall short of target

After falling way short of targets in the first two years, the Bhagwant Mann-led Aam Aadmi Party (AAP) government’s capital expenditure (capex) has shown signs of improvement during the April-November period of the financial year 2024-25.

The state government’s spending on asset creation in the first eight months of the current fiscal year stood at ₹3,700 crore, which is 40% more than the capex of ₹2,646.91 crore during the corresponding period of the previous year, according to a comparative analysis of the data on key fiscal indicators released by the office of accountant general.

In 2022-23, capital expenditure was ₹2,641.45 crore between April and November. Capital expenditure, or capex, is the investment made by the government on the creation of assets that are long-term in nature, give a fillip to economic activity, and generate additional streams of revenue. Income-generating capital assets recover their costs over a period of time.

A finance department official said that the rise in capital expenditure this year is due to the state government’s increased emphasis on asset creation in health, education, employment, and urban development. “There is also an amount of ₹1,200 crore received under the Centre’s Scheme for Special Assistance for Capital Investment, aimed at increasing capital expenditure by states, which has been utilised for asset creation in water resources, urban development, and water supply and sanitation sectors. An additional ₹450 crore are expected shortly under this scheme,” he added.

Around 10 days ago, finance minister Harpal Singh Cheema, while presiding over a meeting with the administrative secretaries, emphasised the need to intensify efforts toward capital creation and revenue generation to accelerate the state’s growth. The officers were also instructed to identify potential opportunities for capital creation within their respective departments. Despite the increase seen so far, the capital expenditure of ₹3,700 crore, though higher than the previous two years, may still fall short of the full-year target of ₹7,445 crore set by the government in its budget for the current fiscal year. The finance minister had lowered the capex target from previous years.

The state has repeatedly fallen short of its budgeted capital expenditure in the past five years. Against a capital expenditure of ₹10,354 crore proposed in budget estimates (BE), the state government spent only ₹4,862 crore during the 2023-24 financial year, leaving a gap of ₹5,492 crore.

In November 2023, a Bank of Baroda report, which studied the capital expenditure of 26 states, had put Punjab at the bottom of the ladder along with Chhattisgarh, Nagaland and Mizoram, calling them ‘laggards’ for slipping behind capex envisaged in their approved budgets.

The sluggish pace of capex is a serious concern for economists, who attribute it to successive governments’ “lopsided priorities” and a “freebie culture”, which have led to “unsustainable subsidies.”

“Their failure to spend on capital creation, despite growth in revenue and heavy borrowings indicates serious flaws in fiscal planning,” said one of them. The Comptroller and Auditor General, in its report on Punjab’s finances during the previous government, also emphasised that borrowed funds should be used to fund capital expenditure, while revenue expenditure should be met from revenue receipts.