Amid the Centre’s thrust for capital expenditure to spur economic growth, rating agency ICRA Limited has estimated that funds availability will not be a constraint this financial year. Karnataka, Maharashtra, Gujarat and Tamil Nadu, and nine other states, have the fiscal space of Rs 7.4 lakh crore for capital spending in the current financial year ending March 2023, rivalling the Centre’s budgeted capital spends of Rs 7.5 lakh crore for the same period.
The assessment is based on the funds that are likely to be available from the unconditional market borrowings of 3.5 per cent of gross state domestic product (GSDP), the interest-free capex loan to be provided by the Centre to the state governments, and the additional power sector reform-related borrowings (0.5 per cent of the Gross State Domestic Product).
Other states with large capex are Andhra Pradesh, Haryana, Kerala, Madhya Pradesh, Punjab, Rajasthan, Telangana, Uttar Pradesh and West Bengal.
“The availability of funds doesn’t appear to be a constraint in FY2023, the actual outgo incurred by these state governments in the early months of this fiscal has been rather muted,” ICRA Chief economist Aditi Nayar said.
The Centre has budgeted for a capex of Rs 7.5 lakh crore in the financial year 2022-23, which includes the Rs 1 lakh crore interest-free loan to be provided to the state governments for capital spending for a period of 50 years.
ICRA estimates the combined revenue deficit of these 13 states to be at Rs 2.1 lakh crore, higher than the Rs 1.8 lakh crore each in this year’s Union Budget estimates, and last year’s provisional.
“We assess that Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Tamil Nadu, Uttar Pradesh, and West Bengal (Sub-set A) will have adequate resources to fully fund or exceed their budgeted capex for FY2023,” Nayar said addressing a webinar.
“However, the fiscal space available for Haryana, Rajasthan, Kerala, Punjab, and Telangana (Sub-set B) appears to trail the capex budgeted for FY2023, by a varying extent, suggesting that additional revenue mobilisation and/or expenditure efficiency measures may need to be found to boost capex,” she said.