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State governments’ capital expenditures have declined on a year-on-year basis during the first five months of the current financial year, according to a report by The Financial Express. This reduction in spending has extended the ongoing slowdown in public sector capital investments.
An analysis of the finances of 18 states, conducted by The Financial Express, revealed that capital expenditures for the period from April to August in FY25 dropped by 6 per cent year-on-year, amounting to Rs 1.67 trillion, compared to Rs 1.78 trillion in the same period last year. Notably, the previous year had witnessed a 40 per cent growth, driven by a favourable base.
State finances
The states reviewed in the analysis include Gujarat, Uttar Pradesh, Madhya Pradesh, Andhra Pradesh, Maharashtra, Tamil Nadu, West Bengal, Bihar, Haryana, Kerala, Odisha, Punjab, Rajasthan, Telangana, Chhattisgarh, Uttarakhand, Himachal Pradesh, and Assam.
In response to the financial challenges faced by these states, the central government accelerated tax devolution by releasing two instalments, amounting to Rs 1.78 trillion for October, instead of the usual single monthly instalment. This follows a similar move in June, when two monthly instalments were also released.
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The report highlighted that the 18 states observed an 11.3 per cent growth in tax revenues between April and August FY25, totalling Rs 11.34 trillion. However, this was lower than the 15.5 per cent growth recorded in the same period last year.
Borrowings surge
Borrowings by these states also saw a 27 per cent increase year-on-year, reaching Rs 3.12 trillion during the same period, although this was slightly lower than the 32.6 per cent growth seen in the previous year.
Additionally, revenue expenditure across the reviewed states rose by 11.2 per cent year-on-year to Rs 14.25 trillion in the first five months of FY25, compared with an 8.8 per cent increase in the same period of the prior year.
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