India Government to Maintain Capex on Buoyant Revenue: Ministry

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(Bloomberg) — Capital expenditure by India’s government’s is likely to be maintained, supported by “buoyancy in revenue growth” over the rest of the fiscal year, the finance ministry said in a monthly report.

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“Sharply rebounding private consumption” backed by improving consumer sentiment and rising employment will sustain growth in the coming months, the ministry said in its economic review for August released on Saturday.

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Government capital spending for April-August reached 2.3 trillion rupees ($28.8 billion), up 35% from the year-ago period, the report said. This level of expenditure has helped drive a “crowding in” of private investment, according to the government.

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While tax revenue is expected to keep growing, “vigorous pursuit of asset monetization at all levels of government will help lower debt stock and hence debt servicing costs,” the ministry said.

Inflationary pressures appear to be declining, helped by preemptive measures taken by the government, prudent monetary policy and easing commodity prices and supply snarls, the ministry said.

Still, risks remain from inflation after lower crop-sowing in the key Kharif season. In addition, global geopolitical tensions over energy security in the winter months could test “India’s astute handling of its energy needs so far,” the report said.