14 states achieve less than 75% of capex targets in FY23: BoB report

The centre has met its target both in terms of actual capex in various areas as well as the loans disbursed to states that were to be used for capex. The fiscal deficit target was also maintained in this year, the BoB report said.

According to BoB, only 4 states have over-achieved and crossed the 100% mark: Karnataka, Sikkim, Arunachal Pradesh and Bihar. Two others came close at above 98% which are Jharkhand and MP. While eleven states had crossed the 80% threshold, the other states have registered lower than average achievement rate, it said.

“The two largest states in terms of planned capex, UP and Maharashtra had an outlay of Rs 2.19 lakh crore which is 29.2% of the total capex of these 25 states. Their combined achievement was just 70% which has brought down the average for the entire sample,” BoB report said. Maharashtra achieved only 72.4 per cent of the target, UP 69 per cent and Kerala 69.4 per cent.

The lowest performance came from Andhra Pradesh at 23% followed by Tripura, Nagaland and Haryana which had less than 50% achievement rate. Out of these 14 states, Andhra Pradesh and Punjab were the only states which had exceeded their fiscal deficit budgeted numbers and probably had some reason for under-spending on capex, though the two are not proportional, BoB said.

On the reasons for states not meeting their capex targets, BoB said, “they tend to wait towards the end of the year to see how their fiscal balances are faring and are not in a position to complete the same by March. There are not enough projects that can be undertaken by the states and hence a combination of lacunae in planning and execution. This ultimately leads to slippages.”

“There can be too much preoccupation with items under the revenue expenditure that there is less attention paid here. There can be a case of over budgeting to begin with to create contingencies. Other extraneous factors at times such as uncertainties in political climate could come in the way of project execution,” BoB said.

The under-achievement phenomenon is not really new as in FY20, the rate was around 72% though in FY22 had improved in 95%. The states certainly have to improve their record here in order to push forward the investment cycle as the private sector will take some time before coming in a broad-based manner. Presently the heavy lifting is being done by the centre which is not adequate as the budgeted expenditure of the two levels of government are almost similar. Hopefully the push given in FY24 would be more decisive, it said.

Capex of government has been considered to be the prime driver of capex in the economy in the last few years. This is so as the private sector has not been in a position to invest for various reasons. These range from lower demand to excess capacity and high inflation.