"Takes Time To Trickle Down": Nirmala Sitharaman Answers Capex Questions

The government will treat capital expenditure in a more exhaustive way in the Union Budget in July, Finance Minister Nirmala Sitharaman told NDTV today in her first post-interim Budget interview with private media.

Ms Sitharaman yesterday presented an interim Budget that mostly stayed within expectation, considering the Lok Sabha election will be held in two months. Any major announcement would have been seen as a populist move by the BJP and Prime Minister Narendra Modi, who is looking to win a third term.

"We will treat capex exhaustively in July (Union Budget). I'd like to add that the allocation for capital expenditure has not been reduced. When you have seen a 30 per cent increase from a low base, you think 11 per cent increase is not big. But it is coming from a higher base," Ms Sitharaman told NDTV.

"Already, after giving Rs 10 lakh crore for capex, giving 11 per cent more seems much less than 30 per cent. But we have reached Rs 11 lakh crore. No matter how much money you put into capex, we have to keep in mind absorption capacity. We need to know how much capex state government departments will be able to spend in a year," she said, explaining what could possibly limit capex performance despite having funds.

"Even if there is capacity, it takes time to trickle down. If you spend Rs 50 lakh crore capex and want it to reach the last trickle point, will it trickle down immediately? Of course not. We have to steadily keep it up. Now we are seeing private capital is also coming," the Finance Minister said.

"In the traditional method, the private sector would bid for a large, single project, such as a bridge. But these days the private sector is coming to bid for work that involves making the machines that would build the bridge too," she added.

Ms Sitharaman said the BJP-led National Democratic Alliance (NDA) government inherited an economy that was in a very bad shape when Prime Minister Narendra Modi came to power in 2014. "We took India from fragile five to a top economy, which is why we are bringing out the white paper now. This is the right time," she added.

The ever present challenge, however, has more to do with factors that are not under anyone's control.

"Uncertainty. Whether trade, or global strategic interests, in every matter no one knows what will happen in two years from now. Uncertainty in everything, in war, in trade, in ties between nations is the biggest challenge," said the Finance Minister who presented her sixth consecutive Budget on Thursday.

She achieved a rare milestone becoming only the second Finance Minister in the country to have presented the Budget for six consecutive years, after Morarji Desai. Ms Sitharaman has been at the helm of the Finance Ministry since July 2019 and is the first full-time woman Finance Minister of the country. She has already presented five full Budgets and this was her first interim Budget.