States To Miss Capex Targets In FY24 Owing To Decline In Revenue: ICRA

The increase in the overall revenue receipts and expenditure of the 21 states in the period under review lagged behind the Budget estimates, while the capital outlays and net lending remained higher. 

Multiple states are expected to not complete their capital expenditure targets for the current fiscal year owing to election polls and the fall in revenue, an analysis by ICRA Ratings revealed. Aditi Nayar, chief economist, ICRA Ratings, noted that a sharp fall in revenue receipts would lead to a major reduction in state capital spending, which increased to a record 35 per cent during the first half of the current fiscal year. 

The economist stated that to manage their budget estimates, 21 states, whose capex and other macro data is available, would have to make sure that the capex run rate is balanced at 28 per cent in the latter half of the year, reported PTI.

Nayar added that the states maintaining the capex run rate at 28 per cent is unlikely, ‘since model code of conduct is likely to take effect in the March quarter before the general elections’. 

Notably, the combined revenue and fiscal deficits of the 21 states increased to Rs 70,000 crore and Rs 3.5 lakh crore respectively, in the April to September period, against Rs 50,000 crore and Rs 2.4 lakh crore logged in the corresponding period a year earlier. 

The report didn’t include Arunachal Pradesh, Assam, Goa, Manipur, Meghalaya, Mizoram, and Nagaland. The increase in the overall revenue receipts and expenditure of these 21 states in the period under review lagged behind the Budget estimates, while the capital outlays and net lending remained higher. 

Nayar added, “This was boosted by the early releases under the scheme for special assistance to states for capital investments (or capex loan) in the April-October period of the current fiscal.”

Revenue receipts and expenditure grew by around 10 per cent in the first six months of the current fiscal year, which were majorly below the growth estimated for the year. The increase in combined revenue receipts of the states weakened to 8.4 per cent in the period under review against 26.4 per cent logged in the year ago period, driven by a sharp cut in grants from the Centre.

At the same time, the annualised growth of combined revenue expenditure of these stated relaxed to 9.6 per cent in the first half of the current fiscal year from 15.5 per cent reported in the year-ago period. Apart from Himachal Pradesh, Karnataka, Kerala, Punjab, and Bengal, the capital spending of the remaining 16 states grew in high double-digits.