The 10 large States that recently presented their Budget projected a combined capital expenditure of ₹6.07-lakh crore for FY24. The estimates for the current fiscal are 15 per cent higher than the ₹5.28-lakh crore that these States projected for FY23.

While Uttar Pradesh projected the highest capex budget of ₹1.47-lakh crore, industrially developed States like Maharashtra and Gujarat budgeted ₹73,901 crore and ₹70,101 crore, respectively. Andhra Pradesh’s capex projection was the lowest among the 10 at ₹31,061 crore.

Target met?

While these States have been increasing their capex targets each year, a closer look at their actual expenditure shows that very few of them come close to achieving their Budget goals.

According to a businessline analysis, only Karnataka, Madhya Pradesh and Gujarat achieved over 75 per cent of their budgeted capex target in the first 11 months of FY23. This is according to the provisional figures of the Comptroller and Auditor General of India (CAG).

Also read: The Budget’s capex challenge

Karnataka achieved 95 per cent of the target while Madhya Pradesh and Gujarat followed with 80 and 75 per cent, respectively. On the other side, Andhra Pradesh, which achieved just 28 per cent of its annual target between April 2022 and February 2023, was ranked the lowest among these 10 States.

But is this a novel trend? Apparently, not. Madhavi Arora, Lead Economist at Emkay Global Financial Services, says historically, States tend to undershoot their budgeted capex by a wide margin (by 20 per cent of Budget estimates on an average over the last seven years).

The trend

“This undershoot is only around 7-10 per cent for revenue expenditure, which is mostly committed in nature (salaries, pensions, subsidies etc),” she said, adding that States’ capex spending is typically skewed heavily towards the last quarter of the fiscal with nearly a quarter of the year’s total spending taking place in March alone.

Despite falling short of the targets in FY23, some States have further increased their projections for FY24. Uttar Pradesh, which projected the highest capex for FY24, has actually achieved only 45 per cent of its FY23 estimates in the first 11 months.

Also read: Budget 2023: Leaning more on capex

The cutback in capex spending in FY23 also comes when States witnessed robust revenue collections during the year. Arora said States are cutting back on capex despite timely payment of GST compensation from the Centre, the release of two advance instalments of tax devolution and Centre’s ₹1-lakh crore special assistance scheme for capex in FY23.

“The reason for this is well-known. It’s fiscal consolidation,” she added.