As many as 13 major States, including West Bengal, Tamil Nadu and Gujarat, have a massive fiscal space of ₹7.4 lakh crore for capital spending in the current fiscal, 81% higher than the last fiscal, Icra said on Thursday.
The 13 States, having nearly 85% share in India’s GDP in 2020-21, had made a capital expenditure of ₹4.1 lakh crore last fiscal. Their Budget estimate for capex spending this fiscal is ₹5.8 lakh crore, the rating agency added.
The agency’s analysis is based on the 13 States of Andhra Pradesh, Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh and West Bengal.
“Icra estimates that the 13 State governments have the fiscal space to incur capital spending of as much as ₹7.4 trillion in FY2023, rivalling the size of the GoI’s capex budgeted for this fiscal. While the availability of funds doesn’t appear to be a constraint in FY23, the actual outgo incurred by these State governments in the early months of this fiscal has been rather muted,” Icra Chief Economist Aditi Nayar said.
Icra estimates the combined revenue deficit of these 13 states will be at ₹2.1 lakh crore, higher than the ₹1.8 lakh crore budgeted.
While tax devolution as well as the goods and services tax (GST) compensation grants are likely to exceed the amount budgeted by the states in the sample in FY23, this will not fully offset the estimated shortfall in other revenues and the projected higher-than-budgeted revenue expenditure in this fiscal, Icra said. “We assess that Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Tamil Nadu, Uttar Pradesh and West Bengal will have adequate resources to fully fund or exceed their budgeted capex for FY2023,” Ms. Nayar said.
However, the fiscal space available for Haryana, Rajasthan, Kerala, Punjab, and Telangana appears to trail the capex budgeted for the current fiscal by a varying extent, suggesting that additional revenue mobilisation and/or expenditure efficiency measures may need to be found to boost capex, she added.