States’ spend on capital projects sees a big jump
The expenses rose from ~2.6 trn in FY15 to ~4.9 trn in FY19, CAGR of 17%
Expenses incurred by states on capital projects rose 17 per cent between 201415 (FY15) and 2018-19 (FY19), from ~2.6 trillion to ~4.9 trillion, logging a compound annual growth rate of 17 per cent.
The expenditure is concentrated primarily on economic services that accounted for around 70 per cent of the spending, followed by social services (25 per cent) and general services (5 per cent), the data from the Centre for Monitoring Indian Economy showed.
Among states, Goa boasts of the highest share in capital outlay as percentage of total expenditure in FY19 at 25 per cent. Odisha, Uttar Pradesh (UP), and Assam were the other key spending states, whose capital expenditure (capex) had a share of 20 per cent, 20 per cent, and 19 per cent, respectively, as a proportion of their overall spending. Punjab languished at the bottom, with a share of only 5 per cent.
In FY19, the expenditure incurred towards capital projects by states at the consolidated level has been at 14.2 per cent of the total expenditure, higher than the 13.3 per cent witnessed in FY15. This was marginally lower than the 14.3 per cent witnessed in 2016-17. The increase, however, has not been very significant, reflecting partly the pressure that states confront when balancing their budgets where they tend to restrict discretionary expenditure to meet the Fiscal Responsibility and Budget Management norms.
A study by CARE Ratings notes that at the state level, there has been a focus on creation of capital assets. Taking FY15 as the base year, 14 out of the 22 states have committed higher expenditure towards capital outlay.
UP, Maharashtra, Karnataka, Bihar, Gujarat, Madhya Pradesh, Telangana, Tamil Nadu (TN), West Bengal, and Odisha have emerged the top 10 states contributing towards the total capex. Together, they account for 73 per cent of the combined capex undertaken by all the states.
Although UP contributes the highest in the total capex undertaken by states collectively, its share has declined from 20 per cent to 18 per cent during FY15-FY19 (Revised Estimates). Likewise, the share of Gujarat in the total capex has declined by 3 per cent and TN by 1 per cent.
On the other hand, there has been an increase in the share of Maharashtra, Madhya Pradesh, West Bengal, and Odisha in the total capex by 1 per cent each during the period. Telangana’s share in the combined capex has increased by 2 per cent during the period under review.
Moreover, states faced constraints in offering the full thrust on capex on account of limited fiscal space available with them since they had to stick to fiscal consolidation norms and allocate more funds on Ujjwal Discom Assurance Yojana.
A sector-wise breakdown of expenditure reveals that transport accounted for nearly 25 per cent of the capex undertaken at the consolidated level, followed by irrigation and flood control (22 per cent), and energy (10 per cent). While transport was the first priority for nearly 13 states and one Union Territory, irrigation figured as the topmost priority for six states during the cumulative period of FY15-19.
Although UP contributes the highest in the capex undertaken by states collectively, its share has declined