Aided by impressive growth in tax revenues, capital expenditure by state governments have shown a marked improvement in the first five months of the current financial year even as the advantage of low base has begun to peter out.
Data gathered by FE of 20 major states showed that these states reported combined capex of Rs 1.21 lakh crore in April-August of FY22, up 70% on year compared with a decline of 35% on year in the corresponding period of FY21. These states’ capex in April-August in the current fiscal year was 10% higher compared with the same in the corresponding period of the pre-pandemic year, FY20.
The Centre also roped in CPSEs for pushing public capex, which is key to an investment-led economic growth revival.
Large central public-sector entities — companies and undertakings — achieved 30% of their aggregate capital expenditure target for FY22 in the first five months of the current financial year, by spending Rs 1.77 lakh crore. The capex by these entities were much lower in the year ago period.
Capital expenditure by these 20 states –UP, Maharashtra, Rajasthan, Tamil Nadu, Kerala, Odisha, Gujarat, Karnataka, Telangana, Madhya Pradesh, Haryana, West Bengal, Andhra Pradesh, Bihar, Punjab, Chhattisgarh, Jharkhand, Uttarakhand, Himachal Pradesh and Tripura –is budgeted to grow 9% on year to Rs 5.84 lakh crore in FY22 over the FY21 Budget Estimate (BE).
What helped the 20 states to sustain their capex performance so far in FY22 has been a 34% jump in tax receipts to Rs 6.86 lakh crore, again upon a waning low base. These states have projected a 0.1% contraction in FY22BE tax receipts (at Rs 21.35 lakh crore) over the BE of FY21. Correspondingly, the need to borrow has also reduced. Borrowings by these states declined by 15% to Rs 2.51 lakh crore in the April-August, 2021 period, compared to 91% rise witnessed in the year-ago period.
The Centre has given the flexibility to the state governments to borrow 75% of their annual net market borrowing limit of Rs 8.47 lakh crore or 4% (50 bps of which linked to achieving capex targets) of their respective gross state domestic product (GSDP) in the first nine months of the current fiscal.
Among the 20 states reviewed, capex by Uttar Pradesh was Rs 18,809 crore in April-August of FY22, an increase of a whopping 1,344% from just Rs 1,303 crore in the year ago period. Madhya Pradesh’s capex stood at Rs 14,805 crore (up 88%), Karnataka’s at Rs 10,273 crore (31%) and Gujarat at Rs 8,461 crore (57%).
The states also saw their revenue expenditure rise 10% on year in April-August of FY22, while total expenditure rose 14%.
During April-August of FY22, the Centre’s capital expenditure stood at Rs 1.72 lakh crore, up 28% on year as against the required rate of 30% to achieve the full year target of Rs 5.54 lakh crore in FY22. The union finance ministry has asked departments to step up capex in the coming months.