Article:
The Department of Expenditure under India’s Finance Ministry has sanctioned capital investment proposals amounting to Rs. 56,415 crore for 16 states under the “Special Assistance to States for Capital Investment 2023-24” scheme in the current financial year. The states include Arunachal Pradesh, Bihar, Chhattisgarh, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Mizoram, Odisha, Rajasthan, Sikkim, Tamil Nadu, Telangana, and West Bengal.
Special Assistance to States for Capital Investment 2023-24 Scheme: An Overview
The Special Assistance to States for Capital Investment Scheme, started by the Ministry of Finance in the 2020-21 fiscal year, aims to stimulate economic growth by boosting capital expenditure at the state level. The scheme was featured in the Union Budget 2023-24 following three years of similar capital expenditure initiatives.
The scheme offers interest-free loans, with a tenure of 50 years, amounting to Rs. 1.3 lakh crore during the financial year 2023-24. It is divided into eight sections, the largest of which (Part-I) involves an allocation of Rs. 1 lakh crore distributed among states relative to their share of central taxes and duties as per the award of the 15th Finance Commission.
Structure and Aims of the Scheme
The other seven parts of the scheme relate to specific projects or are linked to reform initiatives. Part-II encourages states to phase out old vehicles and establish automated vehicle testing facilities. Parts III and IV incentivize states to implement reforms in urban planning and urban finance. Part-V aims to increase housing availability for police personnel and their families within urban area police stations.
With a focus on promoting cultural diversity and local goods through Unity Mall projects, Part-VI aligns with the national vision of integration, Make in India, and One District One Product. Under Part-VII, Rs. 5,000 crore has been earmarked to assist states in establishing digital infrastructure-equipped libraries at the Panchayat and Ward level, primarily benefiting young people.
The scheme’s objective is to achieve a broader economic impact by stimulating demand and creating employment opportunities. It aims to hasten projects under initiatives like the Jal Jeevan Mission and Pradhan Mantri Gram Sadak Yojana by providing funds to meet the state’s share. Furthermore, it encourages urban planning and finance reforms to improve quality of life and urban governance.
Understanding Capital Expenditure in India
Capital Expenditure refers to government-allocated funds for acquiring, building, or enhancing physical assets such as infrastructure, buildings, machinery, and equipment. Such expenditure adds to the productive capacity of the economy and generates future income and job opportunities. The annual budget, presented by the Finance Minister, outlines capital expenditure allocation.
Over the past three years, capital investment outlay has consistently increased, reaching Rs 10 lakh crore— equivalent to 3.3% of the GDP—or a 33% growth (Union Budget 2023-24).
Effective Capital Expenditure: A New Concept
The budget does not classify government spending on creating capital assets through grants-in-aid to states and other agencies as capital expenditure. Instead, these are categorized as revenue expenditure. However, they also contribute to creating fixed assets like roads, bridges, schools, and hospitals. Therefore, the concept of ‘effective capital expenditure’—which includes both capital expenditure and grants for creating capital assets—has been introduced. During Union Budget 2023-24, effective capital expenditure was budgeted at Rs 13.7 lakh crore or 4.5% of GDP. This represents the true scale of public investment by the central government.
