Combined capital outlay of India’s top 18 states is seen 18-20 percent higher on-year this fiscal on the back of 14 percent growth in fiscal 2023. These states account for 90 percent of the aggregate gross state domestic product of all states according to Crisil.
The increase in spending will be supported by healthy goods and services tax (GST) collection, devolution from the central government (share in central taxes, or SICT), and an higher allocation of Rs 1.3 lakh crore in the form of interest-free loans1 to all the states for capital expenditure (capex).
“This fiscal, states have budgeted a strong 43% increase in their capital outlays from fiscal 2023 levels” said Anuj Sethi, Senior Director, CRISIL Ratings. “ If actual spending continues at past averages of 82-85% of the budgeted outlay, it would translate to 18-20% growth this fiscal.” It is expected that elections in some states, funding support from the Centre in the form of advance payment of SICT, and strong GST collection will provide the impetus.
Capital outlays already rose 52 percent year-on-year in the first six months of this fiscal. But a moderation in pace is likely in the second half as the outlay is more evenly distributed this year.
In terms of sectoral mix, on average over the past five years, transport (especially roads and bridges) has 22-26% share in the total capital outlays of states, followed by irrigation (15-20%), water supply & sanitation 15-20%. Other segments such as energy, agriculture, rural development, health and education account for 3-6% share each.
