Piqued by complaints from industry about the low level of capital expenditure by the government, the finance ministry has set up a high level committee headed by Ashok Lahiri, chief economic advisor to the finance ministry, to examine the issue.
The committee will attempt to reclassify different areas of government expenditure to bring out in the open the actual extent of investment expenditure that it incurs annually.
According to sources related to the exercise, this can demonstrate that the government's capital expenditure has been understated by more than 15 per cent. The total expenditure bill of the Centre, estimated for this fiscal, is about Rs 4,38,000 crore (Rs 4,380 billion).
The expenditure reclassification exercise is important for the Centre to gain some brownie points, as it is struggling with an almost fixed allocation pattern of expenditure over the years.
For instance, of the total bill for 2003-04, over 72 per cent is non-Plan expenditure, the major shares of which are meant for defence, interest liabilities and wages and pensions.
Even from the total Plan expenditure of Rs 1,20,974 crore (Rs 1,209.74 billion), over 40 per cent goes to states to meet the gap between revenue and expenditure.
The exercise can give a leeway to the Centre if it can demonstrate that the extent of capital expenditure it incurs is much more than that was revealed under the Plan expenditure.
While the committee has also discussed the possibility of reworking Plan and non-Plan areas, that has not been found feasible.
The expenditure reclassification committee includes officials from the Controller General of Accounts, the Comptroller General of Accounts and from various Central ministries.
Under the existing divisions of expenditure in government, after it is divided between Plan and non-Plan, the sum is further segregated into capital or revenue heads.
The usual measure of the extent of government investment activity takes note of only plan heads. But senior government officials pointed out that a lot of revenue expenditure was sub-classified into capital and current heads.
For instance, the repair of irrigation canals and roads, which are actually capital investments, are shown under non-Plan revenue expenditure.The committee is expected to come out with a scheme that will make it easy to figure out how much investment has been made by the government and also provide a functional classification of expenditure.