Recently, the Indian Government announced the launch of a Scheme Special Assistance to States for Capital Investment for the fiscal year 2022-23. This article aims to shed light on every aspect of this scheme and highlight the importance of capital expenditure in a country’s growth and development.
Scheme Special Assistance to States for Capital Investment
Under this scheme, the state governments are provided monetary assistance in the form of a 50-year interest-free loan specifically meant for capital investment projects. For the fiscal year 2022-2023, a total financial support of Rs 1 lakh crore is to be granted to the states. Notably, this loan is to be over and above the standard borrowing ceiling set for states and should be spent within the same fiscal year.
Eligible and Excluded Parts of the Scheme
The scheme encompasses new or ongoing projects or can be used for settling pending bills related to ongoing capital projects. States are at liberty to propose projects that have a higher value than allocated funds, indicating their priority/preference. However, the scheme excludes projects with a capital outlay of less than 5 crore (or 2 crore for North East) and those dedicated to repair and maintenance, irrespective of their capital outlay.
Different Aspects of the Scheme
This scheme primarily supports capital works, with special preference provided to the PM Gati Shakti Master Plan. It also includes expenditure related to the PM Gati Shakti plan, PM Gram Sadak Yojana, incentives for digitisation, installation of Optical Fibre Cable, encouraging urban reforms, and promoting disinvestment and monetisation.
Understanding Capital Expenditure
Capital expenditure refers to the money spent by the government on the development of machinery, equipment, building, health facilities, education, etc. It involves the expenditure on acquiring fixed assets and investments that offer future returns or dividends. Essentially, capital spending is tied to investment or developmental spending where expenditure benefits extend years into the future.
Significance of Capital Expenditure
Capital expenditure holds long-term significance as it enables the economy to generate revenue for many years by adding or improving production facilities, boosting operational efficiency, increasing labour participation, taking stock of the economy, and enhancing its capacity to produce more in the future.
Difference between Capital and Revenue Expenditure
Unlike capital expenditure, which creates assets for the future, revenue expenditure neither creates assets nor reduces any liability of the government. This expenditure includes salaries of employees, interest payment on past debt, subsidies, pension, etc. Unlike capital expenditure, revenue expenditure is recurring in nature.
Capital Budget of India- UPSC Civil Services Examination 2016 Question Explained
In the 2016 UPSC Civil Services Examination, a question related to the components of the capital budget of the Government of India was asked. The correct answer is that the capital budget includes expenditure on asset acquisition like roads, buildings, machinery, etc., loans received from foreign governments, and loans and advances rendered to States and Union Territories.
To sum it up, the Scheme Special Assistance to States for Capital Investment is an important initiative launched by the Indian Government that intends to boost infrastructure development, encourage digitisation and promote economic growth across states.
