NEW DELHI: States’ capital expenditure likely rose by 9% on year in 2024-25 compared with a 27% growth seen in 2023-24, as they sought to rein in fiscal deficit at 3% of their respective Gross State Domestic Product (GSDP) amid a moderation in tax revenue growth.
A review of the finances of 16 states by FE showed that their capex in FY25 rose to Rs 6.65 lakh crore compared with Rs 6.09 lakh crore in the previous year. These states are: Madhya Pradesh, Andhra Pradesh, Uttar Pradesh, Maharashtra, Tamil Nadu, Gujarat, Haryana, Karnataka, Kerala, Odisha, Punjab, Rajasthan, Telangana, Assam, Chattisgarh and Uttarakhand.
The state capex includes Rs 1.3 lakh crore 50-year interest-free loans given by the Centre in FY25 compared with Rs 89,000 crore in FY24.
The capex data for these 16 large states, which accounted for 85% of national GDP, indicated that the states in aggregate had somewhat contained capex from their own resources to keep fiscal deficit in check. The fiscal deficit of these states is estimated to be Rs 8.47 lakh crore in aggregate or 3% of GSDP in FY25 as against the budget estimate of 3.2%.
According to the Reserve Bank of India data, all states and UTs in aggregate invested Rs 8.2 lakh crore in FY24 (including central assistance) compared with Rs 6.7 lakh crore in FY23. For FY25, the states and UTs budget estimate for capex was Rs 10 lakh crore, which was a bit too optimistic.
India’s economy is seen growing at 6.5% in FY25 compared with 9.2% in FY24, according to the National Statistical Office’s second advance estimates. In terms of demand segments, the main reason for the fall in growth from 2023-24 to 2024-25 is the weakening growth in investment demand, which fell from 8.8% to 6.1% and that in government final consumption expenditure which fell from 8.1% to 3.8% in this period.
Public capex by the Centre and states remained subdued in most part of FY25 due to general elections and extended rains.
The 16 states under review reported a 10.5% growth in their tax revenues in FY25 at Rs 27.5 lakh crore compared with the 13.2% growth recorded in the previous year.
Their borrowings rose 24.5% on year to Rs 9 lakh crore in FY25 as against a 26.2% growth in FY24. Lower growth in tax revenues led to a marginal increase in fiscal deficit to 3% of GSDP compared with 2.9% in FY24 and 2.8% in FY23.
These states under review reported a 9.7% annual increase in revenue expenditure in FY25 to Rs 35.2 lakh crore compared with 9.2% growth seen in FY24.
Source: The Financial Express
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