State governments’ capital expenditures likely fell on an year-on-year basis in the first five months of the current financial year, prolonging the moderation across the public sector capex space.
A review of the finances of 18 states by FE, showed that their capex in April-August of FY25 declined 6% on year to Rs 1.67 lakh crore compared with Rs 1.78 lakh crore (annual growth of 40% on a favourable base) in the year-ago period.
The states reviewed are Gujarat, Uttar Pradesh, Madhya Pradesh, Andhra Pradesh, Maharashtra, Tamil Nadu, West Bengal, Bihar, Haryana, Kerala, Odisha, Punjab, Rajasthan, Telangana, Chattisgarh, Uttarakhand, Himachal Pradesh and Assam.
Sensing the states’ resource crunch, the Centre front-loaded tax devolution to them by releasing two instalments amounting to Rs 1.78 lakh crore for October instead of one regular monthly instalment. In June, the Centre also released two monthly instalments.
The 18 states under review reported an 11.3% growth in their tax revenues in April-August of FY25 at Rs 11.34 lakh crore compared with the 15.5% growth recorded in the year-ago period.
These states’ borrowings rose 27% on year to Rs 3.12 lakh crore in April-August of FY25 as against a 32.6% growth in the year-ago period.
The states under review reported a 11.2% annual increase in revenue expenditure in the first five months of FY25 to Rs 14.25 lakh crore compared with the 8.8% growth seen in the year-ago period.
Finance Minister Nirmala Sitharaman exhorted central ministries to expedite capital expenditure and make up for the shortfalls in the first half of the current financial year in the third quarter itself.
Central public sector enterprises (CPSEs) and other agencies’ capital expenditure fell 11% year over year in the first six months of the current financial year, dragged down by the slower pace of investment by railways and the National Highways Authority of India despite CPSEs’ accelerating capex pace.
The CPSEs and other agencies with annual capex targets of Rs 100 crore and above have set a combined target of investing Rs 7.8 lakh crore for FY25. These agencies invested Rs 3.38 lakh crore in April-September of FY25, compared with Rs 3.79 lakh crore in the year-ago period