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With a meagre 2.2% rise in capex in H1, 18 states to miss FY23 target

According to a report by ICRA, 18 states saw a minimal 2.2 per cent rise in their capital outlays in the first half of FY 2023Premium
According to a report by ICRA, 18 states saw a minimal 2.2 per cent rise in their capital outlays in the first half of FY 2023

States capital spends inch up just 2.2 per cent in first half of the FY 2022-23 despite massive spike in revenues, says ICRA. These states saw a 27 per cent hike in combined revenues, which narrowed the revenue deficits by 75 per cent during the period

Despite a massive decline of revenue deficits by 75 per cent, 18 states registered a minimal 2.2 per cent growth in their capital expenditure in the first half of FY 23, revealed ICRA ratings on Sunday.

For these states to meet their FY23 budget targets of capital expenditure, they have to increase their capital outlays by a massive 57 per cent in the second half of FY23.

According to the report, these large states have budgeted for a combined capital outlay of 6.2 lakh crore. Looking at the recent years trend, the agency has predicted that the states' capex will be lower by at least 23 percent of the budgeted target.

According to the report, the combined revenue deficits of these states narrowed to a low of 30,000 crore in the first half of the current financial year from 1.3 lakh crore in the first half of FY 2022.

In contrast to their increased revenue, these states have collectively spent only 1.59 lakh crore so far during the current financial year. The amount spent has increased only 2.2% YoY.

At the beginning of the FY23, these states targeted to increase their combined revenue deficit to 1.4 lakh crore from 1.1 lakh crore in FY22. To attain this, the state governments projected a growth of 37.8 per cent in capital expenditure. However, they were able to increase the capital outlay only by 2.2 per cent in the first half of FY23.

The report analysed the expenditure data of 18 states which included Andhra Pradesh, Chhattisgarh, Gujarat, Haryana, Himachal, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh, Uttarakhand, and Bengal.

Rise in revenue due to better tax collections

According to report, better tax collected helped these states to witness a rise in their combined revenue by 27 per cent to 13.9 lakh crore in the first half of FY 23 from 10.9 lakh crore generated in the first half of FY 22. There was also a YoY expansion of tax devolution from the centre by 44.6 per cent.

With a 28.6 per cent rise in their own tax revenues during the first half of FY23, these states saw a rise in their combined revenue receipts which was equal to nearly 43 per cent of the budget estimate.

Among the states, Chattisgarh, Gujarat, Karnataka, Maharashtra, Tamil Nadu and Bengal have generated 50-53 per cent of their budgeted own tax revenues. This was the main reason behind the narrowing down of the revenue deficit of these sample states.

Despite this, their combined capital outlay stood at a meagre amount of 1.59 lakh crore. During the period under inspection, the capital outlay of Haryana, Jharkhand, Maharashtra, Odisha, Punjab, Uttarakhand and UP was 26 per cent of their combined budget estimate.

Out of the states included in the study, Andhra Pradesh, Bengal, Haryana and UP have budgeted a 77-127 per cent growth in their capex.

Karnataka, Himachal top gainers of revenue receipt

Out of the total states, Karnataka's revenue receipt stood at 52.8 per cent and Himachal Pradesh's revenue receipt stood at 50.4 per cent higher than their budgeted target. For other states including Andhra Pradesh, Haryana, Telangana, and UP increment were below 40 per cent. For the remaining 12 states it ranged from 40-49 per cent.

The states' own tax revnue expanded by 28.6 per cent to 7.6 lakh crore in H1 from 5.9 lakh crore a year ago, which was 47 per cent of the budget estimate. For the top 12 states, the own tax revenue stood in the range of 40-49 percent ahead of the targets. Whereas, for Bengal, Chhattisgarh, Gujarat, Karnataka, Maharashtra, and Tamil Nadu, it was moderately higher in the range of 50-53 per cent of the budgeted target.

This time, the agency expects the tax devolution to reach 9.3 lakh crore in the current financial year, which will be higher than 8.2 lakh crore. The centre has already released 5.6 lakh crore till now. There was also a sharp decline in the hike in central grants to 2.2 lakh crore in the first half of FY23.

(With inputs from PTI)

 

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