NEW DELHI: With the Centre cutting back on its expenditure, the state governments have been undertaking the bulk of public spending in a bid to spur economic activity.
An analysis of the budgets of 17 major states, which account for about 87 per cent of India’s GDP, shows that major states have budgeted about 15 per cent growth in total expenditure in the financial year 2021-22 (FY22), much higher than the muted 1 per cent growth of the central government over the previous year.
States, in fact, have budgeted 29 per cent year-on-year growth in capital expenditure (capex) at Rs 7.84 lakh crore and a lower 11 per cent year-on-year growth in revenue expenditure (revex) in the upcoming fiscal year.
In absolute numbers, states’ total expenditure is expected to stand at Rs 43 lakh crore in FY22, according to analysts at ICICI Securities.
Along with Centre’s budgeted total expenditure of Rs 35 lakh crore, the total government expenditure is likely to be Rs 78 lakh crore in FY22, up 81 per cent from Rs 5.8 lakh crore when compared to FY21 (RE), the analysts added.
“Assuming a similar rate of growth for all states,we estimate that states’ total capex is likely to be Rs 9.1 lakh crore in FY22, up from Rs 7 lakh crore in FY21. Adding Centre’s budgeted capex to this number, we estimate that total government capex in FY22 i to come in at Rs 14.6 lakh crore, up from Rs 11.4 lakh crore in FY21 RE,” according to ICICI.
So far, all states except three Andhra Pradesh, Telangana and Haryana have announced their budgets for FY22.
Since all states collectively are bigger spenders than the centre and the multipliers associated with states’ expenditure are larger compared to centre’s expenditure, state budgets are very important from growth perspective.
States that have budgeted the highest increases in total expenditure are Uttar Pradesh (33 per cent), West Bengal and Odisha (25 per cent each), Kerala (22 per cent) and Punjab (20 per cent).
Besides, major states have budgeted 35 per cent year-on-year increase in State GST revenue.
“Based on state budget data, we estimate aggregate SGST target for FY22 to be Rs 6.8 lakh crore,” noted the analysts at ICICI.
11% Rise in revenue expenditure
Rs 7.8 L cr Budgeted capital expenditure- FY22
14.7% Increase in states’ total expenditure