Actual capex of states may come up well short
India’s top 21 states - accounting for more than 90% of aggregate state capital expenditure – are aiming for an ambitious 36% rise in capital outlay this fiscal (to Rs 6 lakh crore) over revised estimates of fiscal 2021 (Rs 4.4 lakh crore).
Last fiscal, they spent 82% of the budgeted capital outlay, posting a modest 11% rise on-year over a low base of fiscal There is also a discernable shift in the sectors to where the money is flowing. From a steady increase in water supply and urban transport outlays earlier, more funds were directed towards roads last fiscal, i.e. the pandemic year. Notably, the achievement ratio for roads at 96% far surpasses 2020 (which saw a marked dip in actual capex due to post-election lethargy in many states and at the Centre).
For a number of reasons, we see the 36% target as overstated. Rather, we expect a similar 11-13% rise in capex this fiscal too, assuming that states spend 80-85% of the budgeted estimate.
For one, states have been losing share in the Centrestate mix in infrastructure spends1 since end-fiscal 2019 (see chart below), after a good run in the years prior.
