The first half of the current year’s financial data for twenty-three states reveals a notable improvement in the quality of state spending. States’ capital expenditures increased by a noteworthy 52% during the same time last year. The rate of increase in revenue expenditure is only 9.7%, reported The Print.
States that have incurred more than 50% of their budgeted fiscal deficit but have also registered decent capital spending are in a better position as opposed to states that have reported higher deficits but lower capital spending, the article added.
While taxes have increased by 15%, states’ showing differs on the deficit front.
“The release of tax devolution to states and a pick up in the 50-year interest-free loans for capex by states will support their finances, the discontinuation of the GST compensation and the tapering of grants are likely to exert pressure on some states’ fiscal performance in the coming months,” a section of the article reads.
States have allocated Rs 8.14 lakh crore for capital expenditures in the current fiscal year. Of this, the first half has seen spending of Rs 2.63 lakh crore, which is 52% more than during the same period last year.
States spent a total of Rs 1.72 lakh crore in the first half of the previous fiscal year. States are prioritising capital spending, but they are also benefiting from central government support in the form of interest-free 50-year loans, which helps them keep up their momentum.
In the first half of the year, states have collectively spent more than 32% of the allocated amount. However, there are significant differences between states. In the first half of the year, Andhra Pradesh, Madhya Pradesh, and Telangana have all spent more than half of their allocated capital expenditures.
More than 40% of the capital expenditures that were planned for the first half of this year were also spent by Tamil Nadu, Kerala, and Bihar. On the other hand, Punjab and Karnataka are lagging. From April to September, their actual capital expenditure spending was less than 20% of their estimated budget. These two states have spent greatly on revenue-related expenses during this time.
The first half of the financial year has seen a triple-digit increase in capital expenditure in Telangana, Andhra Pradesh, and Uttarakhand.
While capital expenditure has increased by double digits in the majority of states, it has decreased in Punjab, Karnataka, Kerala, and Himachal Pradesh this year compared to last.
Gujarat has received over 50% of its total revenue in the first half of the year; however, the grants-in-aid category has played a significant role in this outstanding performance.
In the first half of the year, Gujarat has used up over 98% of the allocated grant-in-aid. This suggests that to meet the budgeted revenue target, the state must now rely on its own taxes and non-tax revenue. Grants-in-aid have been instrumental in increasing revenue receipts in Telangana as well.