State Governments Step up Capital Expenditure

The state governments have stepped up capital expenditure in Q1 (first quarter) of the current financial year. The state’s current year capital expenditure reversed the declining trend of the corresponding period in the previous year affected by the COVID-19 pandemic, which necessitated elevated revenue spending and dented revenues. 

The states’ capital expenditure declined by 58% in April-June of FY21 as economic activities froze due to the nationwide lockdown in the country. However, the capital expenditure of the states increased by 135% in April-June of FY22.

The Central Government permitted the state governments to borrow 75% of their annual market borrowing limit of 4% of the Gross State Domestic Product (GSDP) in the first nine months of the current financial year. The Central Government permitted the states to borrow 75% of their annual market borrowing limit of 4% due to the evolving COVID-19 situation.

The data collected from 15 states showed a united capital expenditure of Rs.53,100 crore in April-June of FY22. The data of the Reserve Bank of India showed that the aggregate capital expenditure growth of the states was 2% higher in FY20 compared to FY19. The state’s revenue expenditure rose 11% in April-June of FY22, while the total expenditure increased 17%.  

The capital expenditure of the Union Government grew 26% on year to Rs.1.1 lakh crore during April-June. The Central Government has stepped up spending to support the economy and involved the Central Public Sector Enterprises (CPSEs) in the venture to achieve an investment-led economic growth revival.

The large central public sector entities, companies and undertakings realised 16% of their capital expenditure target for FY22 by spending Rs.93,000 crore in the first three months of the current financial year. These entities achieved just about 7% of their annual capital expenditure target in the previous year. 

The achievement of the entities of 16% of their capital expenditure target shows a decent number, mainly due to the prevailing COVID-19 wave in the country. The states’ tax revenues also increased 45% in April-June of FY22 at Rs.3.1 lakh crore, indicating improvement in the country’s economy.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in

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