Capital expenditure by states set to cross Rs 5 trillion in 2018-19

Over the period, states have ramped up spending on the social sector, which has risen from 6.7 per cent of GDP in 2014-15 to 8 per cent in 2018-19

Capital outlay by all states is expected to touch a staggering Rs 5.37 trillion in 2018-19 (BE), up from Rs 4.7 trillion in 2017-18 (RE), shows the latest Reserve Bank of India (RBI) study on state finances. The spending amounts to 2.9 per cent of Gross Domestic product (GDP).

By comparison, the Centre’s capital expenditure is budgeted at Rs 3 trillion in 2018-19 or 1.6 per cent of GDP. A closer look reveals the changing priorities of states. Capital spending by them on transport has surged to Rs 1.11 trillion in 2018-19, from Rs 663 billion in 2014-15 — a rise of almost 68 per cent over the entire period. By comparison, spending on energy initially rose from Rs 338.7 billion in 2014-15 to Rs 531.3 billion in 2016-17, thereafter declining to Rs 445.6 billion in 2018-19.

Over the period, states have ramped up spending on the social sector, which has risen from 6.7 per cent of GDP in 2014-15 to eight per cent in 2018-19. Again, capital expenditure as a proportion of social sector spending has risen from 10 per cent in 2014-15 to 13 per cent in 2018-19. Much of this is focused on five areas — rural development, followed by water supply and sanitation, urban development, education and public health.