18 Largest States to Spend 18-20% More on Capex: Crisil

India’s 18 largest states are poised to witness a significant surge in capital expenditure for the fiscal year 2023-24, as per a recent report by Crisil. The report projects an 18-20% increase in spending compared to the previous year, attributing this growth to factors such as robust goods and services tax collections, stable central government devolution, and the allocation of interest-free loans totaling `1.3 lakh crore to states.

Key Projections

Overall Spending Growth: The report anticipates a substantial 18-20% rise in capital expenditure by these states, surpassing the 14% growth recorded in FY23.
Budgeted Outlays: States have budgeted for a remarkable ~43% increase in their capital outlays compared to fiscal 2023 levels. The report suggests that if actual spending aligns with past averages of 82-85% of the budgeted outlay, it could translate to the projected growth.
First-Half Performance: Capital outlays in the first half of the fiscal year experienced a remarkable 52% surge for the 18 states, which collectively contribute to 90% of the country’s Gross State Domestic Product (GSDP). This surge was attributed to the front-loading of tax transfers by the Centre.
Moderation in Second Half: Crisil predicts a moderation in spending during the second half of the fiscal year, despite the robust first-half performance.

Sectoral Highlights

Water Supply and Sanitation

The report identifies water supply and sanitation as among the fastest-growing segments in FY24, with states expected to record over 20% growth.
This surge is attributed to various central government schemes, including the Jal Jeevan Mission, Swachh Bharat, and the Atal Mission for Rejuvenation and Urban Transformation.
Additionally, state-specific outlays towards metro projects, infrastructure development for cities, and support provided to urban local bodies are expected to drive growth in this segment.

Expert Insight

Anuj Sethi, Senior Director at Crisil, emphasized, “This fiscal, states have budgeted a strong ~43% increase in their capital outlays from fiscal 2023 levels.
If actual spending continues at past averages of 82-85% of the budgeted outlay, it will translate to 18-20% growth this fiscal.”

Important Questions Related to Exams

Q: What does the recent Crisil report indicate about capital expenditure in India’s largest states for FY24?

A: The Crisil report predicts a substantial 18-20% increase in capital expenditure for India’s 18 largest states in FY24, surpassing the growth recorded in the previous fiscal year.

Q: What factors are contributing to this anticipated surge in capital spending?

A: Robust goods and services tax collections, stable devolution from the central government, and the allocation of interest-free loans totaling `1.3 lakh crore to states are identified as key factors driving the expected increase in capital expenditure.

Q: How have states budgeted for capital outlays in FY24, and what growth is anticipated?

A: States have budgeted for a strong ~43% increase in their capital outlays compared to fiscal 2023 levels. If actual spending aligns with past averages, it could translate to the projected 18-20% growth in the fiscal year.

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