The failure of various Indian states to meet the targeted capital expenditure (CapEx) in the financial year 2023 will likely impact the growth of the Indian economy in the near future. In a recent report by Bank of Baroda it was identified that 14 out of 25 states have not been able to utilise even 75 per cent of the funds earmarked for CapEx. The states have spent only INR 5.71 crore of the budgeted amount. It is quite astonishing that Maharashtra, Rajasthan, Uttar Pradesh, Kerala, Andhra Pradesh and West Bengal, regarded as the most advanced states of the country, are featured prominently in the list of worst-performing states. As per the data provided, Andhra Pradesh has spent only 24 per cent of the funds meant for capital expenditure and has earned the dubious distinction of being the worst-performer among all Indian states. On the other hand, only four states Karnataka, Bihar, Arunachal Pradesh and Sikkim have fully utilised the earmarked funds.
Increased capital expenditure is the key to making any economy healthy and prosperous as it attracts new investments which in turn generates bigger revenue. CapEx funds can be spent on several sectors including infrastructure development, new manufacturing units, etc. where adequate returns are ensured. Since independence, it has been India’s endeavour to allocate more funds to CapEx. The initial five-year plan was aimed at giving CapEx a fillip by allocating funds for multi-purpose dams and as well as to steel plants and various other industries. After the introduction of the new economic policy in 1991, which was aimed at attracting private investments by easing various regulations, the government concentrated more on infrastructure development to lure private investors. Recently, CapEx has been enhanced to negate the adverse effects of the pandemic which caused almost 25 per cent contraction of the Indian economy.
[bsa_pro_ad_space id=1]Thus, the states which have failed to achieve the CapEx target should justify the reasons behind their lacklustre performance. In the said report, it has been found that at least two states did not utilise CapEx funds in-order to keep a check on fiscal deficits. On its part, the Centre should issue a directive to all states to refrain from misusing the allocated CapEx funds for other purposes. Moreover, lack of proper planning on the part of the states has been cited as another reason behind the poor use of CapEx funds. To ensure that capital expenditure is adequately and efficiently spent the states should be required to submit their plans in-order to receive funds. Thirdly, availability of land is causing delays in the implementation of various projects under CapEx. The land problem is particularly severe in populous states like West Bengal, Bihar and Uttar Pradesh. A rehabilitation plan should be put in place, with details of the package informed well in advance so that landowners can be aware of what they will gain by agreeing to vacate the land. Hence, for the non performing states to achieve the CapEx target in the coming financial year, the Centre will have to remove these hurdles at the earliest.