From being a laggard in the previous fiscal, Andhra Pradesh has emerged as the top performing State in capex spending in the first quarter of the current fiscal, outpacing even industrially-rich States.

As per data from Comptroller and Auditor General of India (CAG), Andhra Pradesh has spent ₹12,669 crore in capital expenditure in the April-June period. It accounts for 41 per cent of the State’s capex budget of ₹31,061 crore for FY24. In comparison, the southern state’s capex spend was only 7 per cent of its annual target in the same quarter of the previous year.

Andhra Pradesh was the worst performer in FY23 spending with only ₹6,917 crore or 23 per cent of its budgeted capex in FY23. 

Front-loading

Interestingly, Telangana’s capital expenditure also jumped to 27 per cent of its FY24 budget against 8 per cent expenditure in the same quarter of the previous fiscal. Madhya Pradesh and Rajasthan are the other States that achieved over 20 per cent of its annual target in Q1.

The front-loading of capex by States is contrary to the trend witnessed historically, wherein a major chunk of capex used to be undertaken in the second half of a fiscal year, India Ratings and Research (Ind-Ra) said in a report. 

The rating agency, which analysed the capex spends of 20 States, said Madhya Pradesh, Andhra Pradesh, Gujarat, Telangana and Uttar Pradesh together accounted for 56.4 per cent of the aggregate capex in the first quarter.

The capex growth seems to be driven by robust tax collections, contraction in expenditure, especially towards subsidies and salary payments during the first quarter. Andhra Pradesh, for instance, achieved 22 per cent of its budgeted revenue receipts in Q1 as opposed to 18 per cent in the year-ago quarter. The State also did well in controlling committed expenditures such as interest, pension and subsidy payments in the latest quarter compared to the year-ago period.

Bigger States lag

Surprisingly, major State economies like Maharashtra, Karnataka and Uttar Pradesh have achieved less than 10 per cent of their annual capex target till the first quarter.

“Amongst major States, performance of Karnataka and Maharashtra remains worrisome,” Bank of Baroda said, in its recent note. 

Karnataka was the top performer among all States and Union Territories in FY23, achieving 130 per cent of its annual target in the previous fiscal. However, the State has achieved only capex 3.4 percent of its yearly target in Q1. 

“Limits on spending imposed due to elections in the State explain this. With the formation of a new government, capex spending is likely to improve in coming months,” it added.

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