Capex of 16 states shows robust 21.9% growth in first 5 months of FY19

The total capital spending by these states is budgeted at Rs 4 trillion in 2018-19, roughly 70% of the state capex of Rs 5.75 trillion

Capital spending by 16 large states has grown by a robust 21.9 per cent in the first five months of the current financial year, rising to Rs 963.6 billion from Rs 790.2 billion over the same period last year, an analysis by Business Standard showed. 

This amounts to only 24 per cent of the budgeted capex of these states for 2018-19. By comparison, capital spending (excluding loans) by the Centre has touched 38.1 per cent of its budgeted target for 2018-19 in the first five months. 

These trends suggest that bulk of state capex, which accounts for a lion’s share of general government capex, will be carried out in the second half of the current financial year. 

While this analysis is based on 16 states, it would be representative of the trends at the aggregate state level as these states account for roughly 70 per cent of the budgeted capex of all states in 2018-19. This analysis is based on data furnished by states to the comptroller and auditor general of India. 

At the aggregate level, capital expenditure by these 16 states declined from Rs 963.6 billion in the first five months of 2016-17 to Rs 790.2 billion in 2017-18, rising thereafter to Rs 963.6 billion in 2018-19. 

Disaggregated state-wise data shows that much of the decline in capital spending in 2017-18 can be traced to a single state — Uttar Pradesh. Capital spending by the state declined from Rs 228 billion in 2016-17 (April-August) to Rs 49 billion in 2017-18. In the subsequent year, it rose to Rs 154.5 billion (April-August). While this caused capital spending by states to contract in 2017-18, it subsequently pushed up the numbers in 2018-19. 

Excluding Uttar Pradesh, capital spending by the remaining 15 states grew at much slower 9.2 per cent, rising to Rs 809 billion in FY19 (April to August), up from Rs 740 billion in FY18. In FY17, it was marginally lower at Rs 734 billion. 

The total capital spending by these states is budgeted at Rs 4 trillion in 2018-19, roughly 70 per cent of the state capex of Rs 5.75 trillion. 

The trends so far suggest that bulk of the capital expenditure by states will be carried out in the second half of the current financial year. And as states together account for a lion’s share of general government capex (state capex is 90 per cent more than the Centre’s), the burden of lifting general government expenditure in the second half of the financial year falls squarely on states. 

The central statistics office (CSO) will release estimates of GDP growth for the second quarter of FY19 next month. Gross fixed capital formation which connotes investment activity grew by a healthy 10 per cent in Q1FY19. 

In terms of spending as a percentage of the budgeted amount, Jharkhand leads the pack at 34 per cent, followed by Odisha (34 per cent) and Rajasthan (33.3 per cent). At the other end of the spectrum are the states of West Bengal, Tamil Nadu and Punjab who have spent the least of their budgeted capex so far.