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Capital Expenditure

About Capital Expenditure

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What is Capital Expenditure

Capital expenditure is the money spent by the government on the development of machinery, equipment, building, health facilities, education, etc. It also includes the expenditure incurred on acquiring fixed assets like land and investment by the government that gives profits or dividend in future. 

The Budget estimate of the government's capital expenditure for the year 2020-21 was Rs 1,084,748 crore. The revised estimates of capital expenditure for the 2019-20 Budget came at Rs 1,059,472 crore, while the actuals for the 2018-19 Budget stood at Rs 915,670 crore.
 
Understanding capital expenditure
 
Capital spending is associated with investment or development spending, where expenditure has benefits extending years into the future. Capital expenditure includes money spent on the following:
  • Acquiring fixed and intangible assets
  • Upgrading an existing asset
  • Repairing an existing asset
  • Repayment of loan
Why is capital expenditure important?
 
Capital expenditure, which leads to the creation of assets are long-term in nature and allow the economy to generate revenue for many years by adding or improving production facilities and boosting operational efficiency. It also increases labour participation, takes stock of the economy and raises its capacity to produce more in future.
 
Along with the creation of assets, repayment of loan is also capital expenditure, as it reduces liability.
 
However, the government has to be cautious with the expenditure. In the financial year 2019-20, capital expenditure was 14.2 per cent of Budget Estimates. The government had to cut public spending sharply towards the end of the financial year in order that the deficit target could be met. Total expenditure fell by 0.3 percentage points in 2018-19 over 2017-18. This includes a 0.4 percentage point slash in revenue expenditure and 0.1 percentage point hike in capital expenditure.
 
How is capital expenditure different from revenue expenditure?
 
Unlike capital expenditure, which creates assets for the future, revenue expenditure is one that neither creates assets nor reduces any liability of the government. Salaries of employees, interest payment on past debt, subsidies, pension, etc, fall under the category of revenue expenditure. It is recurring in nature.
 

Latest Updates on Capital Expenditure

This has meant that the share of total assets has fallen to 1.8 per cent in March 2023 from 3.4 per cent in March 2019 as seen in chart 1 (click image for interactive chart).

Updated On: 06 Jun 2024 | 2:28 PM IST

It is looking to start new business lines like collection and recover services

Updated On: 09 Apr 2023 | 8:17 PM IST

Analysts say slowing growth globally may limit future investments

Updated On: 05 Apr 2023 | 11:14 PM IST

Industry body Assocham said capital expenditure cannot be driven largely by public investment and the private sector must participate to increase investments in India's economy

Updated On: 04 Apr 2023 | 7:42 PM IST

Most top executives appear to be upbeat about sales and profit

Updated On: 03 Apr 2023 | 12:39 AM IST

The first of a five-part series analyses the military's capex demand versus allocation. The recent report of the parliamentary standing committee on defence provides the backdrop

Updated On: 28 Mar 2023 | 11:32 PM IST

The biggest improvement year-on-year (YoY) has been by Uttar Pradesh, Maharashtra, Gujarat, and Karnataka

Updated On: 28 Mar 2023 | 11:57 AM IST

If target missed, part of loans to be deducted in 2024-25

Updated On: 15 Mar 2023 | 11:10 PM IST

India's ranking on the UN's HDI has remained more or less unchanged, suggesting the country is doing no better or worse than others, though most are growing much slower than India, writes T N Ninan

Updated On: 24 Feb 2023 | 9:55 PM IST

The company has no plans to raise additional debt for capital expenditure, which it plans to cover with operating cash inflows, the executives said, according to the source

Updated On: 22 Feb 2023 | 7:01 AM IST

It will focus instead on completing existing ones, before committing fresh investments

Updated On: 16 Feb 2023 | 8:32 PM IST

Holding back on investments for even as little as three months could save the conglomerate as much as $3 bn- funds that can be deployed to pay down debt or boost the cash pile, said another person

Updated On: 13 Feb 2023 | 7:54 AM IST

The Budget reflects the shift globally in government capital expenditure, inflation, fiscal deficit and globalisation

Updated On: 10 Feb 2023 | 1:04 AM IST

Petroleum CPSEs and the National Highways Authority of India (NHAI) have so far driven the capex among CPSEs

Updated On: 09 Feb 2023 | 10:46 PM IST

Niti Aayog member Arvind Virmani further said the large increase in capital expenditures by 33 per cent to Rs 10 lakh crore for infrastructure development will accelerate India's economic growth

Updated On: 07 Feb 2023 | 5:44 PM IST

Centre's fiscal deficit is projected to come down to 5.9% of GDP next financial year from 6.4% in the current financial year

Updated On: 07 Feb 2023 | 11:22 PM IST

The Finance Ministry has budgeted Rs 5892 crore for FY24 for the region, which is 113 per cent more than the RE 2022-23

Updated On: 02 Feb 2023 | 11:31 PM IST

Investment in Indian Railways must be backed by reforms

Updated On: 02 Feb 2023 | 10:39 PM IST

Our equity strategists view the budget as positive for infrastructure and capex-sensitive sectors, says Goldman Sachs

Updated On: 02 Feb 2023 | 8:34 PM IST

In 2022-23, the finance minister hopes to grow her net revenue receipts by 8 per cent even as her revenue expenditure would increase by a similar rate

Updated On: 01 Feb 2023 | 11:24 PM IST