11-13% rise in capex likely for States

Mumbai: India's top-21 states accounting for more than 90 per cent of aggregate State capital expenditure are aiming for an ambitious 36 per cent rise in capital outlay this fiscal (Rs6 lakh crore) over revised estimates of fiscal 2021 (Rs4.4 lakh crore), says a report.

Last fiscal, they spent 82 per cent of the budgeted capital outlay, posting a modest 11 per cent rise on-year over a low base of fiscal 2020 (which saw a marked dip in actual capex due to post-electionlethargy in many states and at the Centre), says a report by Crisil.

"For a number of reasons, we see the 36 per cent target as overstated. Rather, we expect a similar 11-13 per cent rise in capex this fiscal too, assuming that states spend 80-85 per cent of the budgetedestimate. For one, states have been losing share in the Centre-statemix in infrastructure spends since end-fiscal 2019, after a good runin the years prior," the report says.

There is also a discernible shift in the sectors to where the money isflowing. From a steady increase in water supply and urban transportoutlays earlier, more funds were directed towards roads last fiscal,or the pandemic year. Notably, the achievement ratio for roads was at 96per cent which far surpasses 2020.82-83 per cent for water, urbantransport, and irrigation. Also, a larger part for funds earmarked forcapex was diverted for Covid-related expenses. These trends areexpected to continue this fiscal too.

There are other signs too. Only four states surpassed budgeted spends lastfiscal. Clearly, the axe fell on capex, with the pandemic weighing onrevenue collections and necessitating higher health and socialexpenditure. In Assam and Bihar, which went to polls recently,budgeted outlay has actually dropped this fiscal, over revisedestimates of fiscal 2021.

And finally, most states have precarious debt levels. Only three hadcomfortable debt (lower than one-fifth of their respective GDP as per2017 FRBM review committee recommendations) as per revised estimatesof fiscal 2021. These elevated debt levels would constrain states'ability for higher spending on capital expenditure. All this, weforecast, will restrain states' capex growth to 11-13 per cent thisfiscal, the report goes on.