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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

  1. Overall Spending Growth: The report anticipates a substantial 18-20% rise in capital expenditure by these states, surpassing the 14% growth recorded in FY23.

  2. 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.
  3. 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.
  4. 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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18 Largest States to Spend 18-20% More on Capex: Crisil_40.1

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