Aided by the front-ending of capex loans by the Centre, the state governments’ capital expenditure seem to have grown at a much higher pace than last year in April-August period of the current financial year.
The combined capex of 17 big states, whose finances were reviewed by FE, rose by 45% to around Rs 1.67 trillion in the first five months of the current fiscal, compared with Rs 1.15 trillion in the year-ago period.
Of course, excluding the interest-free capex loans of about Rs 40,000 crore released by the Centre to these states in the period, their capex growth in the period was only 10%.
The improvement in spending by states on fixed asset creation could also be attributed to the Centre’s stipulation that 33.3 % of Rs 1 trillion untied capex loans would be disbursed to a state only after it met the condition of 45% of annual capex target in the April-September period.
However, given that these states have achieved just 23% of their budgeted annual capex of around Rs 7.3 trillion in April-August, many of them may not have met the condition by September-end to avail one-third of their quota from the untied capex loans of the Centre.
Sources said the Centre will likely relax norms to help states utilise the last instalment of Rs 33,000 crore from the Rs 1 trillion untied interest-free capex loan facility if they meet the fiduciary condition of achieving 45% of their annual capex target by the third quarter instead of the second quarter of FY24.
Notably, these 17 states — Bihar, Gujarat, West Bengal, Andhra Pradesh, Haryana, Karnataka, Kerala, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, Uttarakhand, Telangana, Chattisgarh and Jharkhand reported a 15% growth in their tax revenues in April-August 2024 at Rs 9.82 trillion, upon the 34% growth recorded in the previous year.
The borrowings of 17 states rose 47% on year to Rs 2.14 trillion in April-August FY24, largely due to a low base of last year as they had reported a 37% decline in loans and liabilities during the corresponding period.
These states’ revenue spending rose 10% on year to Rs 12.27 trillion in in the first five months of the current fiscal while total expenditure was up 13% on year at Rs 13.94 trillion.
The Centre has raised the capital expenditure target by 37% on year to a whopping Rs 10 trillion (including Rs 1.3 trillion capex loans to states) for FY24 to continue the public investment-led economic recovery post-pandemic. The Centre has achieved around 37.4% of its capex goal in April-August FY24.
The overall public capex includes the budgetary capital expenditure by the Centre and states, and the spending by CPSEs and state PSEs. While the last few years saw a big jump in Centre’s capex, the increases in spending by other agencies have been rather subdued.