Concurrently, the annual growth of the combined revenue expenditure for these 21 states saw a decline to 9.6%, down from the previous year’s 15.5% in the first half.
The growth in combined revenue receipts of the 21 states decelerated to 8.4% in the reviewed period from 26.4% in the corresponding period last year. This was primarily due to a significant reduction in grants from the Centre.
An analysis predicts that several states might fall short of their capital expenditure targets for the ongoing fiscal year due to elections and a decrease in revenue. A substantial drop in revenue receipts is expected to further compress state capex, which reached a record 35% in the first half of FY24, as stated by Aditi Nayar, Chief Economist at Icra Ratings.
To adhere to their budgetary estimates, the 21 states must maintain a capex run rate of 28% in the second half. However, this seems unlikely, given the potential implementation of the model code of conduct in the March quarter preceding the general elections, according to Nayar.
The combined revenue and fiscal deficits of these 21 states expanded to Rs 70,000 crore and Rs 3.5 lakh crore, respectively, in the April-September period, compared to Rs 50,000 crore and Rs 2.4 lakh crore in the corresponding period of the previous year.
The report excludes Arunachal Pradesh, Assam, Goa, Manipur, Meghalaya, Mizoram, and Nagaland. While the growth of combined revenue receipts and expenditure of these 21 states in the reviewed period trailed Budget estimates, their capital outlays and net lending was higher.
This was propelled by early releases under the scheme for special assistance to states for capital investments (or capex loan) in the April-October period of the current fiscal year, contributing to the increase in capex to 35% of the Budget estimates in the first half of the fiscal year, up from the previous average of 30%, as stated by Nayar.
Revenue receipts and expenditure increased by less than 10% in the April-September period, significantly below the growth budgeted for the year. The growth in combined revenue receipts of the 21 states slowed to 8.4% in the reviewed period from 26.4% in the year-ago period, primarily due to a sharp contraction in grants from the Centre.
Concurrently, the annualized growth of combined revenue expenditure of these 21 states eased to 9.6% in the first half from 15.5% a year earlier. Moreover, both revenue receipts and expenditure trailed the 18-19% expansion indicated in their Budget estimates.
Except for Himachal Pradesh, Karnataka, Kerala, Punjab, and Bengal, the capital expenditure of the remaining 16 states expanded in high double digits.
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