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Due to a decline in income and other variables, Indian states are expected to fail their capital expenditure objectives this fiscal year

<p>An study indicates that a number of states are likely to fall short of their capital spending objectives for the current fiscal year because of declining revenue and polls.<img decoding=”async” class=”alignnone wp-image-289908″ src=”https://www.theindiaprint.com/wp-content/uploads/2023/11/theindiaprint.com-due-to-a-decline-in-income-and-other-variables-indian-states-are-expected-to-fail-.jpg” alt=”theindiaprint.com due to a decline in income and other variables indian states are expected to fail” width=”973″ height=”545″ title=”Due to a decline in income and other variables, Indian states are expected to fail their capital expenditure objectives this fiscal year 9″ srcset=”https://www.theindiaprint.com/wp-content/uploads/2023/11/theindiaprint.com-due-to-a-decline-in-income-and-other-variables-indian-states-are-expected-to-fail-.jpg 300w, https://www.theindiaprint.com/wp-content/uploads/2023/11/theindiaprint.com-due-to-a-decline-in-income-and-other-variables-indian-states-are-expected-to-fail–150×84.jpg 150w” sizes=”(max-width: 973px) 100vw, 973px” /></p>
<p>According to Icra Ratings Chief Economist Aditi Nayar, a sharp decline in tax collections would also cause a significant contraction in state capital expenditure, which reached a record 35 percent in the first half of FY24.</p>
<p>The model code of conduct is likely to go into effect in the March quarter prior to the general elections, so in order for the 21 states whose capex and other macro data is available to maintain their budget estimates, they will need to make sure that the capex run run rate is maintained at 28% in the second half, which is unlikely, according to Nayar.</p>
<p>From Rs 50,000 crore and Rs 2.4 lakh crore, respectively, in the same time last year, the aggregate income and fiscal deficits of these 21 states increased to Rs 70,000 crore and Rs 3.5 lakh crore, respectively, in the April–September period.</p>
<p>Arunachal Pradesh, Assam, Goa, Manipur, Meghalaya, Mizoram, and Nagaland are not included in the study.</p>
<p>These 21 states’ aggregate income collections and spending increases during the review period fell short of the budget expectations, while their net loans and capital outlays increased.</p>
<p>This was enhanced, according to Nayar, by the early disbursements made possible by the program for special assistance to states for capital projects (or capex loans) during the current fiscal year’s April through October.</p>
<p>According to her, this helped explain why capex as a percentage of budget projections increased to 35% in the first half of the fiscal year from an average of 30% in prior years.</p>
<p>The sub-10% rise in revenue collections and expenditures during the April-September period fell far short of the year-over-year growth projected.</p>
<p>The steep decline in Center grants was the primary cause of the 21 states’ total revenue collections increase, which decreased to 8.4% in the year under review from 26.4% in the previous year.</p>
<p>Concurrently, the annualized increase of these 21 states’ total revenue spending decreased to 9.6% in the first half from 15.5% in the previous year.</p>
<p>Furthermore, tax collections and expenditures lagged below the 18–19% growth projected in their budget predictions.</p>
<p>With the exception of Bengal, Kerala, Punjab, Himachal Pradesh, and Karnataka, the capital expenditures of the other sixteen states increased by double digits.</p>
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