States’capex in FY22 seen at Rs 4.8-5.1 lakh crore, lower than Rs 6 lakh crore planned

New Delhi : India’s top 21 states accounting for bulk of the state capex could post 11-13 per cent rise in capex this fiscal instead of an ambitious 36 per cent planned increase in capital outlay of Rs 6 lakh crore over revised estimates of FY21, a Crisil report said on Monday.

“Last fiscal, they spent 82 per cent of the budgeted capital outlay, posting a modest 11 per cent rise on-year over a low base of fiscal 2020 (which saw a marked dip in actual capex due to post-election lethargy in many states and at the Centre). For a number of reasons, we see the 36 per cent target as overstated,” it said.

“Rather, we expect a similar 11-13 per cent rise in capex this fiscal too, assuming that states spend 80-85 per cent of the budgeted estimate,” Crisil noted.

Among the reasons for relatively lower growth in capex include declining share of states in centre-state mix in infrastructure spending, diversion of capex to Covid-related expense and precarious debt level in few cases.

“Hence, even if states spend 80-85 per cent of the budget (which has been the norm), we expect they would post only 11-13 per cent on-year growth in capex this fiscal, to Rs 4.8-5.1 lakh crore,” the Crisil report said.

Noting that many counteracting forces prevail to keep the momentum low, Crisil said that six states of Gujarat, Maharashtra, Karnataka, Tamil Nadu, Odisha and Jharkhand saw a higher diversion of funds for Covid expenditure during second wave of pandemic.

As per the report, only four states surpassed budgeted spends last fiscal indicating that the axe fell on capex. The debt levels of some states have swelled which could put pressure on the capex.

“Only three (states) had comfortable debt (i.e lower than one-fifth of their respective GDP as per 2017 FRBM review committee recommendations) as per revised estimates of fiscal 2021,” the report said