Committed expenditure of states such as salaries, subsidy, pension and interest payments remain high at 7.6% of GSDP and take away a large chunk of revenue.
This has limited their capacity for capital expenditure. States’ capex as a share of total expenditure declined to 14% in FY23 from 18% in FY17.
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An increase in capex spending by states can have a higher multiplier effect relative to that of the Centre to spur growth, create jobs and improve productivity.