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States to miss fiscal capex targets amid revenue decline, polls
ECONOMY & POLICY

States to miss fiscal capex targets amid revenue decline, polls

According to an analysis, it is anticipated that several states will fall short of achieving their capital expenditure targets for the ongoing fiscal year due to elections and a decline in revenue. Aditi Nayar, Chief Economist at Icra Ratings, mentioned that a significant reduction in revenue receipts will result in a substantial contraction in state capital expenditure. She noted that during the first half of FY24, state capital expenditure reached a record 35 per cent.

Nayar stated that to meet their Budget estimates, 21 states, for which capital expenditure and other macro data are available, will need to ensure that the capital expenditure run rate is maintained at 28 per cent in the second half. However, she expressed skepticism about this possibility, citing the likelihood of the model code of conduct taking effect in the March quarter before the general elections. During the April-September period, the combined revenue and fiscal deficits of these 21 states increased to Rs 700 billion and Rs 3.5 trillion, respectively, from Rs 500 billion and Rs 2.4 trillion, respectively, in the year-ago period.

It's important to note that the report excludes Arunachal Pradesh, Assam, Goa, Manipur, Meghalaya, Mizoram, and Nagaland.

According to an analysis, it is anticipated that several states will fall short of achieving their capital expenditure targets for the ongoing fiscal year due to elections and a decline in revenue. Aditi Nayar, Chief Economist at Icra Ratings, mentioned that a significant reduction in revenue receipts will result in a substantial contraction in state capital expenditure. She noted that during the first half of FY24, state capital expenditure reached a record 35 per cent. Nayar stated that to meet their Budget estimates, 21 states, for which capital expenditure and other macro data are available, will need to ensure that the capital expenditure run rate is maintained at 28 per cent in the second half. However, she expressed skepticism about this possibility, citing the likelihood of the model code of conduct taking effect in the March quarter before the general elections. During the April-September period, the combined revenue and fiscal deficits of these 21 states increased to Rs 700 billion and Rs 3.5 trillion, respectively, from Rs 500 billion and Rs 2.4 trillion, respectively, in the year-ago period. It's important to note that the report excludes Arunachal Pradesh, Assam, Goa, Manipur, Meghalaya, Mizoram, and Nagaland.

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