Capex spending by states gathers momentum

Project completion rates for all states up 104% in the Apr-Dec period of FY17

State governments stepped up their capital spending in 2016-17. At the aggregate level, project completion rates for all states is up 104 per cent in the April-December period of the current financial year, compared to the same period in the previous financial year, estimates Deutsche Bank.
 
But, this growth is largely driven by five states, namely Maharashtra, Uttar Pradesh, Telangana, West Bengal and Punjab. Put together, these states account for 83 per cent of the total value of projects completed by states in the first nine months of the current financial year. On the other hand, states like Gujarat, Bihar, Jharkhand, Odisha, Tamil Nadu, Karnataka and Kerala have seen a contraction in project completion rates over the same period. Part of the contraction could be due to the base effect. The report points out that all these states had seen strong growth in the same period in FY16. Uttar Pradesh, West Bengal and Bihar have also seen capex gaining momentum.
 
The Deutsche bank report is based on data from the CMIE database. The value and number of projects completed in a quarter is taken as a proxy for gross capital formation of various states.
 
The report finds that capex momentum is stronger at the state level (up 104 per cent), as compared to the general government (contraction of 13 per cent), which suggests that capex by the central government has slowed down.