This increase (in states’ capex) is attributable to strong revenue generation and support provided by the Centre in terms of advance release of payment to states,” the ministry claimed.
The thrust given to capital expenditure by the Centre has encouraged the states to increase their capex, the Union finance ministry said on Tuesday.
Quoting the data from the the Controller General of Accounts (CGA), the ministry said that capital expenditure by states during April-February 2023, was 11.9% higher compared to the previous year. The states have spent around 54.7% of their budgeted capital expenditure during this period, in line with past trends.
Also, the 24 major states, which have presented their Budgets as of March 23, have cumulatively announced a 17.7% increase in capital expenditure in FY24 compared to the previous year’s Budget Estimates, the ministry noted.
This increase (in states’ capex) is attributable to strong revenue generation and support provided by the Centre in terms of advance release of payment to states,” the ministry claimed.
The Centre’s own capital expenditure during April-February 2023 was 21.7% higher compared to the corresponding period of the previous year. “This has led to an improvement in spending quality, which is reflected in the declining revenue expenditure to capital outlay ratio over the past years. The momentum in central government’s capital expenditure is envisaged to continue in FY24 to sustain economic growth when the global economy is adversely affected by monetary policy tightening, rising inflation and supply chain disruption,” the ministry said in its monthly economic review.
The Center’s budgeted capex for FY24 stands 33% higher than the previous year at 3.3% of the GDP. The Centre has also announced continuing the 50-year interest-free loan to state governments under ‘The Scheme for Special Assistance to States for Capital Investment’ with an enhanced outlay of Rs 1.3 trillion. This is likely to spur investment in infrastructure and incentivise states for complementary policy actions, according to the ministry.
For the last few years, public capex has been playing an important role in arresting the fall of the gross fixed capital formation in the economy, with central and state PSUs also contributing to the drive in good measure. The ministry hopes that FY24 would see a revival of the much-delayed private capex cycle.
On their part, however, some state governments are critical of the Centre’s alleged attempts to assume more fiscal space that what is its due, and want the GST compensation mechanism, which ended on June 30, 2022, to be extended by another five years.
Apart from the robust economic activity, the revenue collection in states has been strengthened by various measures taken by the state governments, the finance ministry report noted. “These include Assam’s liquidation scheme for payment of arrears, Haryana’s one-time scheme for settlement of old VAT dues, Assam and Kerala’s Green tax, and Uttar Pradesh’s new liquor policy with increased fees. Some states like Tamil Nadu, Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh, Haryana, Kerala, Assam, and UT of Puducherry have considered revising their power tariffs during FY23. States like Tamil Nadu, Telangana and Kerala have revised the property taxes to support their revenues.”
Source:financialexpress.com