Capital Expenditure (CAPEX): Crucial Role Of The States
Capital Expenditure (CAPEX): Crucial Role Of The States
Central Idea
- The budget’s clear thrust towards capital expenditure is evident in the 33% increase in its allocation. The primary goal of this allocation is to bolster aggregate demand in the short term and enhance the economy’s productive capacity in the long term. This strategy is widely regarded as beneficial, especially considering the crucial role that infrastructure plays in the growth and development of any economy.
Capital Expenditure of the states
- Capex of the states exceed than the central govt: The combined spending of Indian states on capital expenditure now exceeds that of the central government.
- For example: In 2021-22, this figure combined for states and Union territories, according to budget estimates, was ₹10.5 trillion. The Centre’s effective capital expenditure that year was ₹8.4 trillion, including ₹2.5 trillion as grant for creation of assets.
What is Capital Expenditure (CAPEX)?
- Capital expenditure refers to investments in upgrading existing or building new physical assets by the government or private businesses.
- As businesses expand, capex has a multiplier effect on the economy, creating demand and unleashing animal spirits.
Main types of Capex
- Infrastructure development: This includes building and upgrading public infrastructure such as roads, highways, railways, ports, airports, power plants, and water supply systems.
- Defence and security: This involve the acquisition and maintenance of defence equipment, weapons systems, and other security-related investments.
- Social sector spending: This includes investment in areas such as education, healthcare, and social welfare programs to improve the quality of life of the citizens.
- Rural development: This includes spending on agricultural and rural infrastructure such as irrigation systems, rural electrification, and rural housing.
- Capital investments in public sector enterprises: The government may also invest capital in public sector enterprises to improve their efficiency and profitability
Key reasons why the Indian government emphasizes Capex?
- Promoting economic growth: Capital expenditure is critical for promoting economic growth by creating demand for goods and services, boosting private sector investment, and increasing employment opportunities. By investing in infrastructure, the government can provide the necessary framework for businesses to grow and thrive.
- Improving public services: Capital expenditure is required to build and upgrade public facilities such as hospitals, schools, and water supply systems, and provide necessary equipment and supplies. This investment in public services is crucial for improving the quality of life of citizens and promoting social and economic development.
- Infrastructure development: It is critical for promoting trade, commerce, and investment, and improving the country’s overall competitiveness. By investing in infrastructure, the government can create new economic opportunities, support the growth of existing industries, and attract foreign investment.
- Creating employment opportunities: Capital expenditure creates employment opportunities in the short term through the construction of infrastructure projects and in the long term by supporting economic growth and promoting private sector investment.
- Attracting private sector investment: The government’s emphasis on Capex can also help attract private sector investment by providing the necessary infrastructure and a favourable business environment.
What are the concern over State capex?
- Uneven capacity CAPEX: One general macro-economic challenge is to address this uneven inclination of states or capacity for capital expenditure, which adds uncertainty to the impact of an expansionary fiscal policy led by capex, thus weakening its potential benefits.
- The ultimate aim of all CAPEX is to enhance the productive capacity of the economy: The nature of state capital expenditure drawn in is also vitally important. Ideally, the nature of state capital expenditure drawn in by central capital expenditure should be such that it dovetails with the latter to optimize long-term enhancements of economic capacity.
- States have tendency to postpone capex: The Union budget for 2023-24 encourages states to make reforms in urban local bodies to become creditworthy for municipal bond issuance. However, states have a tendency to postpone capital expenditure until revenue streams firm up.
Way ahead
- States need to improve their execution capacity and establish an enabling regulatory environment to ensure quality and speed of expenditure.
- The planning and budgeting cycle of states should also be aligned with fund releases to fully utilize resources within the available time.
- States play a crucial role in capital expenditure and must not only budget more but also spend fully and uniformly throughout the year.
Conclusion
- States need to prioritize timely and efficient execution of capital expenditure and fully utilizing budgeted capital amounts uniformly throughout the year. The RBI report, while acknowledging that Indian states made higher capital outlays in 2022-23, notes that states would do well to mainstream capital planning rather than treating them as residuals and first stops for cutbacks in order to meet budgetary targets.
Compensatory Afforestation in India
As part of its international climate change commitments, India has promised to increase its forest and tree cover to ensure that they are able to absorb an additional amount of 2.5 billion to 3 billion tonnes of carbon dioxide equivalent by 2030. Unlike the two other commitments India has made — one related to improvement in emissions intensity and the other about the deployment of renewable energy — the forestry target is a relatively difficult one to achieve.
Forests are under stress
- Forests are under stress due to the need for rapid industrial and infrastructure development, and accompanying urbanisation.
- In the last 10 years, more than 1,611 square km of forest land, a little more than the area of Delhi, has been cleared for infrastructure or industrial projects. Nearly a third of this — 529 sq km — has been cleared in the last three years itself.
- But government data also shows that total forest cover had increased by 1,540 square km in the two years between 2019 and 2021.
- A number of tree plantation, afforestation and reforestation programmes are being implemented to increase India’s forest and tree cover.
- These include the Green India Mission, national afforestation programme, and the tree plantation exercises along the highways and railways. Other flagship government programmes like the national rural employment guarantee scheme (MGNREGS) and Namami Gange also have significant afforestation components.
What is Compensatory Afforestation?
- But the showpiece effort for extending India’s forest cover has been its compensatory afforestation programme that seeks to ensure that forest lands getting ‘diverted’ for non-forest purposes, like industrial or infrastructure development, is mandatorily accompanied by afforestation effort on at least an equal area of land.
- While the plantation exercise on new lands cannot be compared with the fully grown forests getting diverted, compensatory afforestation — made a legal requirement through the Compensatory Afforestation Fund Act of 2016 — does ensure that newer parcels of land are earmarked for developing them as forests. Project developers, public or private, are required to fund the entire afforestation activity on these new lands.
- The law also acknowledges the fact that newly afforested land cannot be expected to immediately start delivering the range of goods and services — timber, bamboo, fuelwood, carbon sequestration, soil conservation, water recharge, and seed dispersal — that the diverted forests were providing. As a result, project developers are also asked to pay for the Net Present Value (NPV) of the forests being cleared, based on a calculation decided by an expert committee.
- According to the recently revised calculations, companies have to pay NPV at rates ranging between Rs 9.5 lakh and Rs 16 lakh per hectare, depending on the quality of forests getting diverted.
Iran claims to have lithium deposit
A senior official in the Iranian Ministry of Industry, Mine and Trade (MIMT) said that a deposit located in the western province of Hamedan contains some 8.5 million metric tons of lithium ore. India recently established inferred lithium resources of 5.9 million tons in the Reasi district of Jammu and Kashmir.
The importance of lithium in today’s world
- Lithium is ubiquitous in modern life, found in all kinds of electronic devices, from mobile phones to EVs – basically, anything that requires a rechargeable battery.
- A battery is made up of an anode, cathode, separator, electrolyte, and two current collectors (positive and negative).
- Lithium-ion batteries use aqueous electrolyte solutions, where ions transfer to and fro between the anode (negative electrode generally made of graphite) and cathode (positive electrode made of lithium), triggering the recharge and discharge of electrons.
- Even promising alternatives to the lithium-ion batteries, such as QuantumScape Corp’s solid-state lithium-metal battery, continue to use lithium.
- This is primarily due to Lithium’s low weight as compared to other metals (such as nickel, used in traditional batteries) as well as its superior electrochemical potential.
- Lithium has become especially valuable in the context of increasing climate concerns with the internal combustion engine and the rise of electric vehicles (EV) as an alternative.
- Currently, all EVs use lithium in their battery packs with demand set to rise exponentially over the coming decades.
- A 2020 World Bank report on clean energy transition estimates that the production of minerals, such as graphite, lithium and cobalt, could increase by nearly 500 percent by 2050, to meet the growing demand for clean energy technologies.
Chemically modified nanosheets: IISc
Surface changes of two-dimensional molybdenum disulphide nanosheets can lead to highly effective applications like delivering drugs to diseased cells, according to a study by the Department of Organic Chemistry (OC) and Materials Research Centre (MRC), Indian Institute of Science (IISc).
More about the Study
- Nanomaterials must usually modified or customised depending on the application to improve efficiency.
- They are chemically modified through functionalisation, which involves attaching ligands (small or large molecules) to the surface of the nanomaterial.
- Thiols can be exchanged with naturally-occurring thiols in biological systems, which could allow drugs attached to these nanosheets to be released.
- These chemically-modified nanosheets were also found to be safe to use inside living cells, according to the IISc.
- In the new study, the researchers modified the surface of 2D-MoS2 nanosheets with thiol (sulphur-containing) ligands.
How would it be possible?
- To modify the surface of the 2D-MoS2 nanosheets to create a functional version (BOD-MoS2), the team first used a fluorescent thiol called boron-dipyrromethene (BOD-SH).
- After that, they tested the possibility of thiol-to-thiol exchange on BOD-MoS2 using glutathione (GSH), a naturally occurring thiol found in abundance in cancer cells.
- GSH molecules swapped places with BOD-SH on the surface of the nanosheet—a process that they confirmed using fluorescence techniques.
- The researchers attached an anti-cancer drug doxorubicin (DOX) to the nanosheet surface. They found the possibility of thiol exchange between GSH and DOX, allowing DOX to get dropped off at the diseased site.
- Because the exchange happens only in the presence of high concentrations of GSH found in diseased cells, drugs like DOX can be delivered specifically to cancer cells without affecting normal cells, which can also potentially reduce any side effects.
Flashback
- Previous efforts have focused on using gold nanoparticles for such biomedical applications, according to the researchers.
- Still, these nanoparticles are expensive and have limited efficiency due to their non-selectivity between mono thiols and disulphides.
- Our experiments show that 2D-MoS2 nanosheets can be an effective substitute for gold nanoparticles, and they will be greatly beneficial in the field of nanomedicine, said IISc.
- Moreover, the MoS2 nanosheets were found to be stable in biofluids. They also have a higher surface area than gold nanoparticles, meaning they can be more efficient.
Again Controversy around Pegasus
In his recent lecture at Cambridge University, Congress leader Rahul Gandhi alleged that the Israeli-made spyware Pegasus had been used to snoop on him. He also claimed that intelligence officers asked him to be “careful” while talking on the phone as his calls were being tapped.
What was the Pegasus controversy?
- Pegasus, developed by the Israel-based cybersecurity company NSO Group, first made headlines in October 2019, when Facebook-owned platform WhatsApp said that journalists and human rights activists in India had been targets of surveillance by operators using the spyware. At the time, WhatsApp didn’t reveal the names, identities and “exact number” of those targeted for surveillance but told the media that it had contacted each one of them.
- Two years later, a global collaborative investigative project revealed that Pegasus might have targeted 300 mobile phone numbers in India, including that of two ministers in the Central government, Opposition leaders, a constitutional authority, and several journalists, civil society leaders, and business persons.
- Although the government repeatedly rejected the findings of the global media investigation, it didn’t provide any facts on the matter, and never explicitly denied the use of the spyware.
How does Pegasus work?
- When initial reports on Pegasus came out, it was thought that the spyware works only by sending an exploit link, and if the target user clicks on the link, the malware or the code that allows the surveillance is installed on the user’s phone.
- However, later it was revealed that Pegasus had evolved its method by using ‘zero-click attacks’, which do not require any action from the phone’s user.
- Once spyware is installed in a phone, it begins contacting its operator’s control servers to receive and execute operator commands and send back the target’s private data, including passwords, contact lists, calendar events, text messages, and live voice calls from popular mobile messaging apps.
- The operator can even turn on the phone’s camera and microphone to capture activity in the phone’s vicinity.
The aftermath
- Following a huge furore, the Supreme Court, in October 2021, ordered an investigation headed by Justice RV Raveendran to conduct a “thorough inquiry” into the allegations.
- After months of examination, two reports were submitted to the court, one by Justice Raveendran and another by a technical committee that analysed some of the phones allegedly targeted by Pegasus.
- On 25 August 2022, then Chief Justice of India N V Ramana said that the committee didn’t find any conclusive evidence on the use of the spyware in phones examined by it.
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