The government will set up a committee under the finance secretary to improve the National Pension System, a defined contribution scheme introduced in 2004, to address employee concerns while also adhering to fiscal prudence, the FM said on Friday. The decision comes on the back of demands to revert to the Old Pension Scheme, which provided defined benefits sans employee contribution. The committee may also consider the Andhra Pradesh model of a hybrid scheme (Guaranteed Pension Scheme) involving contributions and defined payouts. The proposal for a hybrid structure was made by the RBI group headed by BK Bhattacharya in 2003. ISHAAN GERA looks at the facts:
The finance ministry has stepped up the scrutiny of capital expenditure by various departments like never before to ensure they utilise the funds on time and help stimulate growth, officials said.
Spending by states, which will get 13% of the Centre’s FY24 budgetary capex outlay in the form of long-term, interest-free loans for asset creation, will be more closely monitored, they added.
The ministry is planning more frequent meetings with various departments to review progress, as it feels intended benefits from the capex push won’t accrue unless funds are actually spent and, that too, on time.
“Capex is being monitored very closely at the highest level in the ministry (by the finance minister). This is in addition to the regular meetings held by senior officials from the departments of economic affairs and expenditure,” a senior finance ministry official told ET.
The central government has allocated as much as ₹ 10 lakh crore for capex for FY24, on top of a record ₹7.28 lakh crore this fiscal. Of this, states will get ₹1.3 lakh crore next fiscal.
“Such a huge chunk of money has never been allocated for capex, so fund utilisation needs special attention. Departments should get cracking, else the intended benefits won’t accrue,” said the official. A large chunk of capex has been earmarked for the ministries of railways and roads, given their greater appetite and execution capabilities. “Some states have to be more proactive as well,” he added.
Tighter monitoring comes following the revised capex estimate of ₹7.28 lakh crore for this fiscal fell short of the budget estimate of ₹7.5 lakh crore. While central government departments have improved their capex fund utilisation in the wake of constant nudge by the finance ministry, states have struggled to use up their quota this fiscal (₹1 lakh crore), especially the chunk of funds that is tied to reform measures to be undertaken by them.
At Rs 5 lakh crore, a half of the total capex outlay for FY24 has been earmarked for two ministries-the railways and the road transport & highways.
In the followingmath of the pandemic, the central government has raised its reliance on budgetary capex to spur growth, betting big on its high multiplier effect. The capex was raised by 27% on-year in FY21, 39% in FY22 (including equity infusion into Air India Assets Holding) and 23% (revised estimate) in FY23-way above the increase in overall budget size of the relevant years. The capex outlay for FY24, too, has been raised 37.4% from the revised estimate for this fiscal, way above the 7.5% rise in the overall spending. Consequently, capex would constitute a record 22.2% of the total budgetary spending in FY24, once morest 16.2% this fiscal and just 12% in FY14.
Persistent focus on capex assumes significance, as India’s growth is estimated to slow down to 6.1% in FY24 from 6.8% this fiscal, according to the International Monetary Fund. The country, however, will still remain the world’s fastest-growing major economy.
The Finance Ministry released the monthly economic review for January 2023 which reported that the geopolitical tensions in Europe, spiralling energy, food and fertiliser prices, monetary tightening and inflationary trends have elevated the downside risks to the global economic outlook. Despite these headwinds, the Indian economy is estimated to grow by 7.0 per cent YoY in FY23.
The measures announced in the Union Budget FY24, such as a rise in capital expenditure, increased focus on infrastructure development, boost to the green economy, and initiatives for strengthening financial markets etc., are expected to promote job creation and spur economic growth.
In addition to this, easier KYC norms, expansion of DigiLocker services, and overall impetus on digitisation and last-mile connectivity are predicted to strengthen financial markets, the survey noted further.
During the fourth quarter of 2022-23, various high-frequency indicators (HFIs) pointed towards a slowdown in general, as monetary tightening appeared to have started weakening global demand.
This may continue in 2023 as various agencies have forecasted a decline in global growth. Apart from the lagged impact of monetary tightening, the uncertainties emanating from the lingering pandemic and relentless conflict in Europe may further dampen global growth
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