With the Centre delaying transfer of states' share of GST collection that has been consistently falling this fiscal and poor non-tax mop-up, a majority of the states are going slow on their budgeted spending, which in the first half rose only 8.7 percentage points, finds a report.
As a result, the states' fiscal spending has increased to 37.6 percent of the budget estimates, up from 31.8 percent in the same period last fiscal, says a report on the finances of 18 large states by brokerage Motilal Oswal.
This falls short of the past three years' average of 39 percent, says the report, adding at 37.6 percent total spending is weaker than 12.7 percent in Hi of FY19.
It can be noted that five Opposition-ruled states led by Bengal and Kerala had on Wednesday threatened to sue the Centre for not transferring their GST share since August. Also, barring for April, GST mop-up has never touched the Rs 1 lakh monthly target this fiscal, averaging below Rs 95,000 crore.
"The planned expenditure of large 18 states, which account for around 90 percent of all the states' spending, stood at 37.6 percent of their budget estimates in H1 of FY20, which is up from 31.8 percent in H1 FY19," says the report.
Had it not been for a 16.6 percent jump in spending in the second quarter, there would have been a degrowth as in Q1 there was marginal decline in the same, it notes, adding total spending of the states was 22 percent of the budget estimates in Q1 and 38.6 percent in H2.
Some of the 18 states whose finances were assessed include Andhra, Gujarat, Haryana, Karnataka, MP and Maharashtra among others.
The report said Maharashtra and Himachal ran a fiscal surplus in H1, but the numbers in both the states are much lower than that of H1 of FY19.
Meanwhile, revenue collection for the first time in eight years declined in Q1 but grew 12.5 percent in Q2 primarily driven by non-tax receipts, the report said.