Recent data has alarmingly revealed that in the first six months of the ongoing fiscal, the combined capital expenditure (CapEx) of 19 major states of the country including Tamil Nadu, Karnataka, Andhra Pradesh, Maharashtra and Gujarat stands at only INR 1.67 lakh crore much below the combined budgeted CapEx of INR 6.58 lakh crore in 2022-23. On the other hand, the revenue expenditure of the states is expected to simultaneously rise by 20 per cent. As a result, employment generation has been severely hampered, along with various welfare projects meant for uplifting marginalised sections of society. Quite clearly, if the trend of low CapEx and high revenue expenditure continues, the economies of various states will crash, affecting the livelihoods of lakhs of people. To avoid such a situation, states should aim to bring down revenue expenditure to a level wherein adequate funds are available to invest in revenue boosting sectors. This, will help improve the economic health of affected states, and contribute to making the Indian economy stronger and more vibrant.
Over the years, in place of generating revenue, states have made it a habit to ask for funds from the Centre. Indeed the Centre is duty-bound to help the states in distress, but it should not be expected to cover all deficits made through ill-considered expenditure by states. For example, the West Bengal government has made it a practice to regularly announce freebies, deliberately overlooking the damaging effects on the state’s economy. Thus, due to paucity of funds, many ongoing development projects in the state have come to a halt. Other states are no different as they spend more on unproductive sectors than on making judicious investments to help their economies grow. The majority of funds are spent on running the government, including salaries, pensions and interest on loans with revenue expenditure severely out of proportion. A sincere effort to curb spending and focus on serving the people is necessary.
CapEx is crucial as it generates demand in the economy. Apart from opening many vistas for unemployed youths, CapEx creates multiple effects such as future cash flow and spurs consumer demand. So, states should not be weary of investing in CapEx as it will benefit people in a manner in which freebies cannot. Rather than indulging in cheap politics, they should make adequate investments to generate revenue for its welfare projects. It is a step necessary to taking the nation forward. Capital formation is a joint responsibility and both sides will have to perform. So states should sincerely put effort into generating revenue through CaPEx without depending only on the centre to bail them out of the current financial predicament.