Finance Secretary TV Somanathan has said the Centre will not slash capital expenditure in the current fiscal year, mentioning that capital expenditure, or capex, is good for long-term economic growth and short-term developments should not distract from that goal.

Many independent economists have suggested that fiscal policy should back monetary policy in quelling inflation. India’s inflation based on the Consumer Price Index (CPI) soared to 7. 79 per cent in April, an eight-year high. In a surprise move, the Reserve Bank of India (RBI) had earlier this month hiked the repo rate by 0. 4 percentage point to 4. 4 per cent to contain inflation.

The finance ministry has budgeted Rs 7. 5 lakh crore capital expenditure in FY23 compared with a revised Rs 6. 03 lakh crore capex in FY22.

“We will continue with the committed capex,” Somanathan told ET in an exclusive interview.

The government has budgeted a fiscal deficit of 6. 8 per cent of gross domestic product in FY23 but with food and fertiliser subsidies expected to be much higher due to the war in Ukraine, the fiscal deficit is likely to breach the target.

“If we curtail capex in view of the short-term issues, then we will hurt the long-term growth. It will impact committed projects in multiple sectors such as roads, railways,” he told the daily, emphasising that there will be no budgetary restraints on capital spending.

While the Centre is in no mood to lower the capex, the fiscal policy will in general aid the RBI in taming inflation.

There could be a redistribution of some revenue expenditure, which will ensure total spending does not rise significant and hurt the apex bank’s monetary policy, the daily quoted one official as saying.

“It is not a dire situation. There could be some cut in revenue expenditure but not with the same intensity.”