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ICRA Ratings in its latest report said that Capital expenditure (capex) of 18 states has risen just 2.2 per cent in the first half of the current fiscal (H1FY23) even as their combined revenue deficit has narrowed to more than one-fourth from the year-ago period. These states have budgeted a combined capital outlay of Rs 6.2 lakh crore for this fiscal.

The report stated that this means that to use the budgeted outlay their spending will have to jump by 57 per cent (or by 4.6 lakh crore) in the second half of the fiscal to meet the 37.8 per cent increased capex, which looks ambitious and thus the states are going to miss the capital outlay target by a sizeable extent. But these states have collectively spent only Rs 1.59 lakh crore so far this fiscal, which is just about a growth of 2.2 per cent annualised.

According to the report, revenue deficits of these 18 states have narrowed to a low Rs 30,000 crore in the first half of the current fiscal from Rs 1.3 lakh crore in the corresponding period in FY22. This revenue tailwind comes in spite of these states budgeting for a combined revenue deficit to Rs 1.4 lakh crore in FY23 from Rs 1.1 lakh crore in FY22. Despite this, their combined capital outlay rose by a muted 2.2 per cent in H1, sharply lower than the high 37.8 per cent growth indicated in their budgets, necessitating a sharp 57 per cent increase in H2 to achieve the target.