12 major states may have to cut capex by Rs 2.7 lakh crore in FY21: ICRA

NEW DELHI: Ratings firm ICRA has cautioned that a dozen major state governments, which account for three-fourths of India’s GDP, may have to cut an aggregate Rs 2.5-2.7 lakh crore in their budgeted capital spending this fiscal year due to the pandemic-induced strain to their revenue.

The aggregate debt of these states is set to expand to 28.9% of gross state domestic product (GSDP) in the ongoing fiscal 2021 from 21.9% in FY19 and an estimated 22.3% in FY20, while revenue receipts are set to shrink by a significant 19.3% against the 14.3% growth budgeted for this fiscal year. Shortfalls in state goods and service tax collections, sales tax or value-added tax and central tax devolution have contributed to the contraction.

The combined revenue deficit of states is expected to widen to Rs 5.8 lakh crore, or 3.9% of ICRA’s estimate of GSDP in FY2021, from Rs 82,200 crore budgeted by these states for FY2021. This, in turn, would compress capital expenditure.

The 12 states in ICRA sample are Andhra Pradesh, Gujarat, Haryana, Karnataka, Kerala, Maharashtra, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh and West Bengal.