States’ capex for FY23 seen rising by 36% to Rs 6.8 lakh crore

States had budgeted 36 per cent higher capital expenditure (capex) during this financial year, which might lead to a sharp rise in their fiscal deficit to Rs 8.4 lakh crore, a report said on Friday. Registering an increase of 34.1 per cent from the pre-pandemic (FY20) levels, 26 large States, excluding Assam, had spent Rs 5 lakh crore in capex, or Rs 1.3 lakh crore more than they had spent in FY20, showed an analysis ICRA of these States’ Budgets. 

According to the agency, these 26 States are on course to spend Rs 6.8 lakh crore or 35.8 per cent more in this financial year in capex over FY22 when it stood at Rs 5 lakh crore. As much as 72 per cent of the incremental Rs 1.8 lakh crore capital push is led by Uttar Pradesh, Maharashtra, West Bengal, Odisha, Andhra Pradesh and Haryana. 

In the previous financial year, the capex push was led by Bihar, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, Telangana, Tamil Nadu and Uttar Pradesh.

The combined capex of these 26 States is budgeted to expand by an impressive 35.8 per cent to Rs 6.8 lakh crore in FY23 on top of the 34.1 per cent or Rs 5 lakh crore they had spent in FY22. In FY20, they had spent Rs 3.7 lakh crore in capex, while FY21 was a washout due to the pandemic, the agency said. 

The report also noted that with this aggressive capex push, these States would also see their fiscal deficits widening sharply to Rs 8.4 lakh crore in FY23 from Rs 6.3 lakh crore in FY22 and much higher than Rs 4.8 lakh crore in FY20. 

However, deficit was higher in FY21 at Rs 7.9 lakh crore due to the higher pandemic expenses and lower revenue. 

In FY22, these States had much narrower revenue and fiscal deficits. While revenue deficit was similar to the pre-COVID level, fiscal deficit exceeded the FY20 level on account of higher capex. 

In Budget estimates for FY23, these 26 States had pegged their revenue receipts, revenue expenditure and capital expenditure at Rs 35.8 lakh crore, 36.9 lakh crore and Rs 6.8 lakh crore respectively. These numbers were 19.8 per cent, 19.7 per cent and 35.8 per cent respectively higher than those in FY22.  

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