Data from the Comptroller and Auditor General (CAG) monthly bulletin for States show that in the first quarter of FY25, out of the 15 largest States by their Gross State Domestic Product, 10 States experienced a sharp decline in capital expenditure.
Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Shares and Stock Brokers, explained, “The General Election is the primary factor behind the subdued State capital expenditure. Data from April to June show that the aggregate capex of 27 States was 20 per cent lower than the previous year. However, July 2024 marked a recovery, with a 6.8 per cent increase. A similar trend was observed during the 2019 elections, where State capex decreased 6.5 per cent, only to rebound in July.”
Similar trend was observed in the Centre’s finances too, with capex of the Central government declining 35 per cent in the first quarter of this fiscal.
The Emkay Global Financial Services August 2024 report also noted that due to the 2024 General Elections, many States ‘frontloaded’ their capital expenditure. This means States significantly increased spending on capex in FY24 to offset the anticipated decline in FY25.
State elections
States like Andhra Pradesh and Odisha have already held elections in May, while Maharashtra and Haryana are set for elections in October. Most of these States have either experienced low growth in capital expenditure or have seen lower utilisation of their overall capex budgets.
Andhra Pradesh’s capital expenditure decreased from ₹12,495 crore as of June 2023 to ₹1,417 crore as of June 2024, marking an 88 per cent decline. Similarly, Telangana’s capital expenditure dropped from ₹9,817 crore as of June 2023 to ₹5,854 crore as of June 2024, a 40 per cent decrease, while Gujarat’s spending fell from ₹11,866 crore as of June 2023 to ₹8,844 crore as of June 2024, a decline of 25 per cent.
In most States, actual capital expenditure as a percentage of the Budget remained below 20 per cent. States like Uttar Pradesh, Maharashtra and Chhattisgarh have the lowest actual capex as a percentage of Budget, with 5.6 per cent, 6.6 per cent and 8.5 per cent, respectively.
States like Madhya Pradesh, Kerala and Telangana recorded the highest actual capex as a percentage of Budget with 19.5 per cent, 17.8 per cent and 17.5 per cent, respectively.