13 states can incur capex worth Rs 7.4 trillion in FY23: ICRA report

Spending space available without pressure to their fiscal profile, says agency

A clutch of 13 states, with 85 per cent share of India’s Gross Domestic Product (GDP), have the fiscal space of Rs 7.4 trillion for capital spending in the current fiscal (FY23). That is 81 per cent higher than the capex of Rs 4.1 trillion they incurred in FY22, according to rating agency ICRA.

The funding potential is 29 per cent higher than the states' FY23 budget estimate (BE) of Rs 5.8 trillion. ICRA’s assessment considered funds likely to be available from the unconditional market borrowings of 3.5 per cent of gross state domestic product (GSDP). It factored the interest-free capex loan the central government will give to states.

The 13 states incurred a capex of Rs 915 billion in April-July 2022, approximately 16 percent of the FY23 budgeted estimates. Muted outgo in early months tempers expectation around actual capex that can be achieved in this fiscal, it said.

Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Tamil Nadu, Uttar Pradesh, and West Bengal will have adequate resources to fully fund or exceed budgeted capex for FY23, said ICRA.

However, the fiscal space available for the five governments of Haryana, Rajasthan, Kerala, Punjab, and Telangana appears to trail the capex budgeted for FY23. They may have to engage in additional revenue mobilisation and/or expenditure efficiency measures may need to be found to boost capex, said the agency.

As for the Centre’s capex, it has budgeted for Rs 7.5 trillion in FY23. This includes the Rs. 1.0 trillion interest-free loan to be provided to state governments for capital spending for 50 years.