WB's revenue expenditure outpaces capital spending in H1 FY25: Report

West Bengal's fiscal performance in the first half of the 2024-25 fiscal reflects a growing imbalance between revenue and capital expenditure, aligning with broader trends observed across major Indian states, according to rating agency CareEdge.

While the state recorded a 13.5-per cent year-on-year increase in revenue expenditure, its capital expenditure grew by only 7.7 per cent, significantly falling short of its budgeted targets, the agency's latest report on state and central finances said.

Amit Mitra, principal chief advisor to Chief Minister Mamata Banerjee and the state's finance department, had recently said Bengal's capital spending had increased from Rs 2,226 crore in 2010-11 to a budgeted amount of Rs 35,865.55 crore in 2024-25.

 

"Revenue expenditure of states remained strong in H1 FY25. In aggregate, the top 20 states in our sample utilised 41.5 per cent of their budgeted revenue expenditure in H1 FY25, slightly higher than the 40 per cent utilisation in H1 FY24," the CareEdge report said.

It noted that the possible reasons for such slippages could include the implementation of electoral promises, including measures like freebies, income assistance and loan waivers.

West Bengal's fiscal deficit stood at 3.7 per cent of its Gross State Domestic Product (GSDP) in the first half (H1) of FY25, exceeding the 15th Finance Commission's recommended ceiling of 3 per cent, it showed.

This places the state in the higher fiscal deficit bracket among the country's top 20 states.

While the aggregate fiscal deficit for these states averaged 2.9 per cent of GSDP, West Bengal's figure underscores its ongoing fiscal challenges, driven by elevated revenue spending and slower-than-expected capital expenditure growth during the period, the agency said.

The analysis of state finances for the first half of FY25 revealed a mixed performance among the 20 major states, representing 93 per cent of the country's GDP.

While revenue expenditure showed robust growth, capital expenditure (capex) remained sluggish, raising concerns over infrastructure development and long-term economic growth, the report said.

On the central finances front, during the first seven months of FY25, the Centre's fiscal deficit was recorded at Rs 7.5 trillion (46.5 per cent of the budget estimate), it noted.

On the receipts side, tax collections remained largely steady. However, on the expenditure side, the capex scenario was sluggish.

"As highlighted earlier, the general elections during the first quarter weighed on the overall capex during H1. Although we expect capex to pick up in the remainder of the fiscal year, the ratio of capital expenditure to revenue expenditure is expected to slightly trail below the budgeted level for FY25," the report added.