NEW DELHI: States’ capital expenditure likely rose by over a quarter in 2023-24 compared with a 18% rise in 2022-23. This was supported by the Centre’s interest-free loans to them and the states’ own robust revenue growth.
A review of the finances of 24 states by FE, showed that their capex in FY24 rose to Rs 7.16 trillion compared with Rs 5.68 trillion in the previous year, a rise of 26%. These states are: Madhya Pradesh, Andhra Pradesh, Uttar Pradesh, Maharashtra, Tamil Nadu, West Bengal, Bihar, Gujarat, Haryana, Karnataka, Kerala, Odisha, Punjab, Rajasthan, Telangana, Assam, Chattisgarh, Jharkhand, Uttarakhand, Himachal Pradesh, Tripura, Sikkim, Nagaland and Meghalaya.
These states’ capex includes Rs 1.09 trillion in 50-year loans given by the Centre in FY24 compared with Rs 81,000 crore in FY23, and around Rs 15,000 crore in the year before. The Centre had made a baseline capex scenario for states at around Rs 6 trillion using their own resources in FY24 as a precondition for the soft loans.
The capex data for these 24 states, which accounted for 94% of GDP, indicated that the states in aggregate have met the baseline capex estimates for FY24.
According to the Reserve Bank of India data, the states in aggregate invested Rs 6.82 trillion in FY23 (including central assistance of Rs 0.82 trillion). In FY24, the aggregate capex may be around Rs 7.5 trillion once the data for the remaining nine states/UTs are captured.
In FY24, India’s real GDP accelerated to 8.2% from 7% the previous year, driven by gains in gross fixed capital formation. This was possible due to public capex led by the Centre, states and CPSEs even as private consumption remained subdued. The Centre met its capex revised estimate of Rs 9.5 trillion for FY24 (includes capex support to states, railways and the National Highways Authority of India). Central public-sector entities – companies and departmental agencies (CPSEs) – achieved 109% of their combined capital expenditure target for FY24 by investing Rs 8.05 trillion, an all-time high.
Besides interest-free loans from the Centre, frontloaded tax devolution helped the states increase their capex in FY24.
The 24 states under review reported a 15% growth in their tax revenues in FY24 at Rs 29.51 trillion compared with the 13% growth recorded in the previous year.
Better revenues helped these states moderate borrowings. Their borrowings rose 13% on year to Rs 8.37 trillion in FY24 as against a 15% growth in FY23. Lower borrowings indicated that all states’ aggregate fiscal deficit would remain below 3% of GDP in FY24 as well. The states’ aggregate fiscal deficit stood at 2.8% of GDP in FY22 and FY23, aided by buoyancy in their revenues and containment of revenue expenditures.
The two dozen states under review reported a modest 8% annual increase in revenue expenditure in FY24 to Rs 37.9 trillion compared with 12% growth seen in the previous year.
Source: The Financial Express