Excluding the interest-free capex loans of about Rs 20,000 crore released by the Centre to these states in the April-June 2023, their capex growth in the period came in at 25%.
The state governments seem to have pressed the accelerator again on the capital expenditure front, after a relative slowdown in pace witnessed in the last financial year. The combined capex of a dozen big states, whose Q1FY24 finances were reviewed by FE, rose 81% on year to around Rs 64,650 crore in the quarter, compared with a 16% decline in the year-ago quarter.
Excluding the interest-free capex loans of about Rs 20,000 crore released by the Centre to these states in the April-June 2023, their capex growth in the period came in at 25%.After registering a robust 33% growth in FY22, states’ capital spending, net of the loans from the Centre, saw just 6% growth in FY23. This was against an ambitious target of 38%.
Overall, the improvement in capex in Q1FY24 could be attributed to the Centre’s condition that 33.3 % of Rs 1 trillion untied capex loans would be disbursed to a state only if it met the condition of 45% of annual capex target in April-September period.
However, given that these states have achieved just 10% of their budgeted annual capex of around Rs 5.38 trillion in Q1, they have a tough challenge to scale up spending to achieve another 35% of their annual target in Q2FY24 and be able to avail one-third of their quota from the untied capex loans of the Centre.
To augment resources for the states to accelerate capital expenditure, the Centre released two instalments of tax devolution totalling Rs 1.18 trillion for June instead of the normal monthly devolution of Rs 59,140 crore.
Notably, these 12 states — Andhra Pradesh, Haryana, Karnataka, Kerala, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, Uttarakhand and Telangana, reported a 21% growth in their tax revenues in Q1FY24 at Rs 4.5 trillion, upon the 40% growth recorded in the previous year.
The borrowings of these dozen states rose sharply by 173% on year to Rs 83,300 crore in Q1FY24, largely due to a low base of last year as they had reported a 73% decline in loans and liabilities in Q1.
These states’ revenue spending rose 8% on year to Rs 5.4 trillion in Q1FY24 while total expenditure was up 13% on year at Rs 6.1 trillion.
The Centre has raised the capital expenditure target by 37% on year to a whopping Rs 10 trillion (including Rs 1.3 trillion capex loans to states) for FY24 to continue the public investment-led economic recovery post-pandemic. The Centre has achieved around 25% of its capex goal in Q1FY24.
Supported by the Goods and Services Tax (GST) compensation, improved tax transfers and higher capex-specific loans, the states’ consolidated gross fiscal deficit was brought down from 4.1% of GDP in the pandemic-hit FY21, which was the highest level since FY05, to 2.8% in both FY22 and FY23.
Source:financialexpress.com