The capital expenditure of 18 states has surged by 2.2% at ₹1.59 lakh crore in the first six months of FY23 even as their combined revenue deficits narrowing to a subdued ₹30,000 crore in the first half of FY23 as against ₹1.3 lakh crore in FY22, according to a report by the rating agency ICRA. This is a sharp decline in the FY23 budget estimates by 37.8%. The report says that there needs to be a whopping increase of 57% in the capital expenditure of these states to meet their FY23 budget target.

The 18 states in the report are Andhra Pradesh, Chhattisgarh, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh, Uttarakhand and West Bengal. Of this, the capital expenditure of Haryana, Jharkhand, Maharashtra, Odisha, Punjab, Uttarakhand, and Uttar Pradesh were below or equal to 20% of their respective budget estimates for FY23. Meanwhile, the capital outlay for Andhra Pradesh, West Bengal, Uttar Pradesh and Haryana, witnessed a growth between 77% and 127% for FY23.

“To meet the combined capital outlay of ₹6.2 lakh crore included in the FY2023 budget estimates of the 18 states, a sharp ~57% growth in spending is required in H1 FY2023 relative to H1 FY2022,” ICRA said in a statement.

“For the combined capital outlay of the 18 states to be in line with the FY2023 budget estimates of ₹6.2 lakh crore, it would imply spending ₹4.6 lakh crore in H2 FY2023. This is a sharp 57% higher than the actual capital outlay of ₹3 lakh crore in H2 FY2022. Taking into account the trend of lower-than-budgeted capital outlay as well as back-ended spending in recent years, we are apprehensive that the combined spending of the 18 states could be ~23% lower than the FY2023 BE,” the rating agency added.

As per the provisional actuals (PA) data released by the comptroller and auditor general (CAG) for the first half of FY2023, the combined revenue receipts of these 18 states increased by approximately 27% to ₹13.9 lakh crore in H1 FY2023 from ₹10.9 lakh crore in H1 FY2022, led by tax revenues.

Meanwhile, the revenue receipts of Himachal Pradesh and Karnataka stood at 50.4% and 52.8% respectively, thus making them the only two states whose revenue receipts in H1 FY2023 exceeded 50% of their budgeted amounts for FY2023. The revenue receipts of Andhra Pradesh, Haryana, Telangana and Uttar Pradesh were below 40%. The revenue receipts of the remaining 12 states in the first half of FY2023 were between 40% and 49% of the amount included in their FY23 budget estimates (BE).

Meanwhile, the combined states’ own tax revenues (SOTR) for these 18 states witnessed a growth of 28.6% in H1 of FY2023 to ₹7.6 lakh crore as against ₹5.9 lakh crore in H1 of FY2022. SOTR comprises nearly half of the total revenue receipts of 18 states. The combined SOTR of the 18 states in the first half of FY23 was approximately 47% of the budget estimates of FY23 and higher than the levels in H1 of FY21-22. Of this, Chhattisgarh, Gujarat, Karnataka, Maharashtra, Tamil Nadu and West Bengal received 50% to 53% of their budgeted SOTR for FY23 in the first six months. The SOTR of the remaining 12 states stood between 40% and 49%.

states’ own tax revenues (SOTR)

Capital expenditure of 18 states surges 2.2% in H1 FY23