April 26, 2023
The 24 major states had collectively announced a 17.7% increase in capital expenditure for FY24
Revenue collection in states had been strengthened by various measures taken by the state governments
The Centre's own capital expenditure during April-February 2023 was 21.7% higher than the corresponding period of the previous year
The Centre's budgeted Capex for FY24 is 33% higher than the previous year at 3.3% of GDP
Indian States’ capital expenditure (Capex) was 11.9% higher in April-February 2023 than in the same period last year, with approximately 54.7% of their budgeted Capex spent during this period, according to a report from the Ministry of Finance.
The ministry also noted that the 24 major states had collectively announced a 17.7% increase in capital expenditure for FY24 compared to the previous year’s budget estimates, which was due to strong revenue generation and support from the Centre.
The finance ministry report also noted that revenue collection in states had been strengthened by various measures taken by the state governments, such as Assam’s liquidation scheme for payment of arrears, Haryana’s one-time scheme for settlement of old Value Added Tax (VAT) dues, and Assam and Kerala’s green tax. States like Tamil Nadu, Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh, Haryana, Kerala, Assam, and the Union Territory Puducherry have considered revising their power tariffs during FY23, while Tamil Nadu, Telangana, and Kerala have revised their property taxes to support their revenues.
The Centre’s capital expenditure during April-February 2023 was 21.7% higher than the corresponding period of the previous year, which has resulted in an improvement in spending quality and a decline in the revenue expenditure to capital outlay ratio over the past years. The ministry expects this momentum in the central government’s Capex to continue in FY24 to sustain economic growth, given the adverse effects of monetary policy tightening, rising inflation, and supply chain disruption on the global economy.
The Centre’s budgeted Capex for FY24 is 33% higher than the previous year at 3.3% of GDP, and it has also announced the continuation of the 50-year interest-free loan to state governments under ‘The Scheme for Special Assistance to States for Capital Investment’ with an enhanced outlay of INR 1.3 trillion. This is expected to encourage investment in infrastructure and incentivize states for complementary policy actions.
The ministry acknowledged that public Capex has played a crucial role in arresting the fall of the gross fixed capital formation in the economy, with central and state Public Sector Units (PSUs) contributing significantly.
Source: Financial Express