TREND: States dragging feet on capex despite funds 'one big puzzle'

TREND: States dragging feet on capex despite funds 'one big puzzle'

Informist, Tuesday, Apr 18, 2023


By Priyasmita Dutta


NEW DELHI – A push by the Centre notwithstanding, states continue to tread slowly in terms of capital expenditure, with 24 large states spending only 55.1% of their 2022-23 (Apr-Mar) Budget target as of February-end.


The 24 states for which data is available till February, together spent only 4.11 trln rupees in Apr-Feb compared with the Budget target of 7.45 trln rupees for the entire financial year, according to data from the Comptroller and Auditor General of India. The capital expenditure by the 24 states is 12.1% more than the 3.66 trln rupees spent during year-ago period.


"Based on historical capital expenditure pattern, we are seeing a continuation of the trend where states miss their spending targets," said Gaura Sen Gupta, India economist at IDFC FIRST Bank. "However, if they have pent-up projects in the pipeline, and they go heavy on expenditure in 2023-24, it may put some pressure on their fiscal position," she said.


The lackadaisical performance of state governments is despite the Centre offering 1 trln rupees for capital expenditure as 50-year interest-free loans. Subsequently, it cut the allocation to 760 bln rupees in the revised estimate, as states were not fully using this limit.


"States' revenues were strong, coupled with the Centre front-loading disbursements. Additionally, they also have a stable and steady fiscal position, which means financing the deficit was not an issue," said Abhishek Upadhyay, senior economist, ICICI Securities Primary Dealership. 


"It is one big puzzle...The Centre's 1 trln rupees to states has taken time to stabilise and even if funds have been sanctioned under them, logistics and other implementation-based issues may have likely stopped them from spending," Upadhyay said.


Among states, Karnataka has done well by spending 413.28 bln rupees, or 94.8% of its full-year target, followed by  

Madhya Pradesh at 367.46 bln rupees, or 80.4% of the target. Only three other states--Kerala, Gujarat and Himachal Pradesh--have spent close to 75% of their annual targets in the first 11 months of 2022-23.


Among the bigger states, Andhra Pradesh has fared the worst, spending only 84.88 bln rupees or 27.7% of the target, in Apr-Feb.


A total of 13 of the 24 states have spent less than half their annual targets in first 11 months of the year.


According to the data, West Bengal spent 152.13 bln rupees or 45.9% of its capital expenditure target, till February.


However, West Bengal Finance Minister Chandrima Bhattacharya claimed the state has done enough. "We have spent on roads, education, health and wherever else it was necessary to," she told Informist.


The poor performance of states on the capital expenditure front comes at a time when the Centre has been pushing such spending to revive the economy. It has more than doubled its capital expenditure target in the last four years to 10 trln rupees in 2023-24 from 4.26 trln rupees in 2020-21.


In Apr-Feb, the Centre spent 5.90 trln rupees or 81.1% of the full-year target. The capital expenditure during the period was 21.7% more than in the year-ago period.


"The states are taking some time to figure out how to spend the 760 bln rupees capital expenditure loans. We are hopeful this year (2023-24), they will have a better roadmap and have investments lined up from the first quarter itself," said a senior finance ministry official.


Though the performance of states has been nothing to write home about, the Centre has increased the allocation to states for interest-free loans for capital expenditure by a whopping 71.1% to 1.3 trln rupees in 2023-24.


What becomes of the funds this year remains to be seen.  End


Edited by Avishek Dutta


For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.


Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.


Informist Media Tel +91 (11) 4220-1000

Send comments to


© Informist Media Pvt. Ltd. 2023. All rights reserved.