To boost the States’ performance on the capital spend front, the Centre on Monday approved ₹56,415 crore to 16 provinces for capital investment. The Centre’s intervention comes at a time when a number of large states are underperforming their own budgeted capital expenditure spend.

Under ‘Special Assistance to States for Capital Investment 2023-24’ Scheme, the Finance Ministry stated that capital investment projects in diverse sectors have been approved including health, education, irrigation, water supply, power, roads, bridges and railways.

Besides that, the Ministry said in its statement that funds for meeting the State share of Jal Jeevan Mission and Pradhan Mantri Gram Sadak Yojana have also been provided to the States under this scheme to enhance pace of the projects in these sectors.

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Bihar topped the list of States to get highest capital support of ₹9,650 crore from the Centre followed by Madhya Pradesh ₹7,850 crore and West Bengal ₹7,523 crore to overcome the spiral affect of economic slowdown accentuated by the Covid-pandemic.

The picture on capital spend front is mixed as the Centre has met its target both in terms of actual capex in various areas and the loans disbursed to States that were to be used for capex, States have tended to disappoint in FY23.

A recent Bank of Baroda study of 25 States showed that a total of ₹7.49-lakh crore was budgeted for by these States but they spent only ₹5.71-lakh crore which is 76.2 per cent of the total.

Only four States – Karnataka, Sikkim, Arunachal Pradesh and Bihar – have crossed the 100 per cent mark while Jharkhand and Madhya Pradesh hovered around 98 per cent. The two largest States in terms of planned capex – Uttar Pradesh and Maharashtra – underperformed.

Given this disparate performance, the Centre decided to continue with capital investment to States scheme, first announced in FY20-21, in the Budget 2023-24 too with a commitment of an overall sum of ₹1.3- lakh crore that would be distributed to States covered under identified categories through eight different parts.

Experts’ take

Experts believe the Central capital push will bring energy into the States performance.

“The Centre is concerned that the States are not spending on capex as per their budgets. In an attempt to expedite the process, they had released two instalments of tax transfers sometime back. This has been topped today with the ₹56,000-crore interest free loan. As this can he used only for capex there is better targeting. States would hopefully get into action in second quarter,” Madan Sabnavis, Chief Economist, Bank of Baroda, told businessline.

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