Capex growth by Centre, States drops to 2% in Q1

New Delhi: Call it the Covid-19 impact or rising bill for maintaining the government, the total capital spending of Centre and 14 Indian states (accounting for 63 per cent of total state budget) has fallen off the cliff in the April-June quarter, and has grown by a mere 2 per cent level over last year.

As per the monthly accounts available for 14 states, while their total spending in Q1 FY21 stood at 18.4 per cent of budget estimate (BE), similar to that in previous years, the spending growth was entirely led by a 9.7 per cent YoY increase in revenue spending.

On the other hand, states' capital spending (including loans and advances) contracted a strong 43.5 per cent YoY last quarter, marking the fourth contraction in the past five quarters.

What this shows is that state governments spent more to maintain its size and clearing debt during pandemic rather than spending on capital activities that prop up economic activities, generates jobs and help propel the growth momentum.

"Somehow states have to get more proactive and focused in relation to their spending. If additional liquidity is available through various schemes being announced by the Centre to kick start economic activities and take the economy back on growth momentum, states need to see it is used more productively," said an analyst tracking the state finances asking not to be named.