- Monday, March 03, 2025
By: Shubham Ghosh
Economic experts have warned that 12 large states of India that released their local budgets over the past few weeks and forecast aggressive spending growth in the current fiscal are likely to fall short of their targets, Reuters reported.
The consequence could be a threat to economic growth.
The states include Maharashtra, India’s most industrialised state which is also home to the country’s financial capital Mumbai; Uttar Pradesh, the most populous state; and Gujarat, the home state of prime minister Narendra Modi.
The states are estimating expenditure to have grown 21.5 per cent in 2022-23 and planning to raise it by 11 per cent in 2023-24, the Reuters report added.
Actual spending data available for April 2022-January 2023 period shows the expenditure went up by only 11 per cent compared to what it was a year ago, the report added.
According to economists, this trend was likely to be seen across all states of the country.
The states released their local budgets in February and March after the Modi government unveiled the federal budget on February 1.
“While the latest budgets are factoring in an aggressive spending growth in the coming year (2023-24), it must be borne in mind that states have generally failed to achieve their spending targets in recent years,” I-SEC PD economists Tadit Kundi, A Prasanna and Abhishek Upadhyay wrote, the Reuters report added.
States in India collectively tend to spend more than the central government and have an important bearing on growth and welfare.
“Expenditure (as a % of GDP) has fallen in FY23, despite buoyant revenues,” Pranjul Bhandari, India chief economist at HSBC Securities and Capital Markets, was quoted as saying.
According to him, slower state spending is attributed to an end of a compensation cess, volatility in oil prices and a rise in commitments linked to social schemes sponsored by the central government.
