States lag Centre in capex push so far in FY24: CAG-Bank of Baroda data

States have been lagging behind the Centre in capex push so far in the financial year 2023-24 (FY24).

During the April-November period, while the Centre has spent 58.5 per cent of its Rs 10 trillion capex target for FY24, 26 states cumulatively have spent 45 per cent of the Rs 7 trillion target, according to analysis of Comptroller and Auditor General of India (CAG) data by the Bank of Baroda economists. 

“The states this year have tended to lag the Centre. Clearly, there is a longer distance to be covered by these states,” Bank of Baroda said in its report.

This is also significant because the Centre had allotted Rs 1.3 trillion for FY24 under the interest-free loans scheme for capital investment by states. Till November, capex amounting Rs 97,374 crore has been approved and Rs 59,030 crore released to the eligible states.

The report has clubbed the states in four categories based on their capex achievements of above 50 per cent (the proactive states), 40-50 per cent (conservative states), 30-40 per cent (not-so-sure states), and less than 30 per cent (laggards) of the overall target. While Telangana tops the table with 78.3 per cent spending of capex target by November, Nagaland is at the bottom with only 18.2 per cent capex in the first eight months of FY24.

The list of other proactive states includes Haryana (68.6 per cent), Madhya Pradesh (65.6 per cent), Bihar (60.5 per cent), Andhra Pradesh (58.2 per cent), Kerala (57.1 per cent), and Tamil Nadu (50.3 per cent).

“These will have fewer challenges in meeting their targets. Five of seven states are from the South. Further, Telangana and Madhya Pradesh were states that had state elections and could have been more aggressive on this score,” the report said.

The conservative states include Sikkim (49.8 per cent), Himachal Pradesh (49.7 per cent), Meghalaya (48.7 per cent), Rajasthan (46.8 per cent), Assam (46.5 per cent), Odisha (44 per cent), Jharkhand (41.2 per cent) and West Bengal (41 per cent).

The report said these states would have some challenges in meeting their targets but could get closer to the same. “This is so because even if they do want to spend in the last couple of months based on their revenue flows, they would need to have projects in hand to enable the same. There were 8 such states of which 5 were relatively small,” it said.

The not-so-sure states include Gujarat (39.6 per cent), Uttar Pradesh (37.8 per cent), Uttarakhand (35.3 per cent), Maharashtra (30.9 per cent), and Karnataka (30.8 per cent).

The report said this was an important category because it has four states that are the largest spenders on capital. “They together account for a little over 50 per cent of total capex of states. Their joint achievement is 35.5 per cent of the annual target,” it said.  

Apart from Nagaland, the laggard states include Mizoram (27 per cent), Chhattisgarh (26.7 per cent), Punjab (25.4 per cent), Tripura (24.1 per cent), and Arunachal Pradesh (22.5 per cent).

The report said the heavy lifting in capex is still to be done by both the Centre and state governments as data up to December shows that private sector investment may not have yet picked up in a broad-based manner. “The states are more constrained by FRBM (Fiscal Responsibility and Budget Management) norms and could cut back on capex to ensure that the fiscal deficit targets are adhered to. Therefore, the possibility of slippage would be tied to the revenue earned in the next few months,” it said.