India Ratings on Monday said the share of combined capex of states in the GDP may improve marginally to 2.8% in FY24 from 2.5% in FY23.
In accordance with the recommendations of the 15th Finance Commission, the states were allowed a fiscal deficit of 4% of GSDP in FY23, of which 0.5% was tied to power sector reforms. Notwithstanding this, the available fiscal space for undertaking incremental capex, an assessment of the provisional data for 26 states from the Comptroller and Auditor General showed 26 states in aggregate have achieved 52% of the FY23 budgeted capex during April-January FY23.
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Only a handful of states such as Kerala, Karnataka, Gujarat, Himachal Pradesh, Madhya Pradesh, Bihar and Odisha have incurred capex in the range of 60% to 74% of FY23 budgeted estimate (BE) during April-January FY23, it said.
The states have borrowed considerably less than the budgeted gross market borrowings of around Rs 9 trillion for FY23. This indicates the states combined have not utilised the additional fiscal space available for capex.
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The centre’s decision to consider off-budget borrowings by state government entities in FY22 and FY23 as part of states’ net borrowing ceiling for FY23 could have dented market borrowings by states.
The rating agency expects the gross market borrowings of states would be Rs 8 trillion in FY24 with net market borrowings projected at Rs 5.1 trillion.
The rating agency has revised the outlook on the finances of Indian states to “neutral” for FY24 from “improving.”