Several states are likely to miss their capital expenditure targets for the ongoing fiscal due to polls and a fall in revenue, according to an analysis by Icra Ratings Chief Economist Aditi Nayar. The report highlights that a significant drop in revenue receipts will lead to a major compression in state capex, which rose to a record 35% during the first half of FY24. Nayar stated that to maintain their Budget estimates, 21 states will need to ensure that the capex run rate is maintained at 28% in the second half, which is unlikely due to the model code of conduct likely taking effect in the March quarter before the general elections.
The combined revenue and fiscal deficits of these 21 states widened to Rs 70,000 crore and Rs 3.5 lakh crore, respectively, in the April-September period, from Rs 50,000 crore and Rs 2.4 lakh crore, respectively, in the year-ago period. The report excludes Arunachal Pradesh, Assam, Goa, Manipur, Meghalaya, Mizoram, and Nagaland.
While the growth of combined revenue receipts and expenditure of these 21 states in the period under review trailed Budget estimates, their capital outlays and net lending were higher. Early releases under the scheme for special assistance to states for capital investments contributed to the increase in capex as a proportion of Budget estimates to 35% in the first half of the fiscal from the previous years’ average of 30%, according to Nayar.
This development comes amid a broader economic landscape where revenue receipts and expenditure increased by sub-10% in the April-September period, significantly below the growth budgeted for the year. Both revenue receipts and expenditure trailed the 18-19% expansion indicated in their Budget estimates. The capital expenditure of the remaining 16 states, excluding Himachal Pradesh, Karnataka, Kerala, Punjab, and Bengal, expanded in high double-digits.
By PTI
