MC Analysis | Richer states better at capex utilisation in first 7 months of FY25

India's richer states have better capex utilisation

Indian states are no better than the Centre in utilising the capex. A Moneycontrol analysis shows that the poorer states are doing worse than their richer peers.

While the Centre’s capex utilisation stood at 42 percent of the full-year budget target of Rs 11.11 lakh crore in the first seven months, compared with 54.7 percent a year back, states too have lagged in spending.

In the first seven months of the fiscal year until October, the states spent just over a third of their FY25 capex budget, compared with 39.2 percent in the same period last fiscal.

The calculation considers 16 large states which account for over 80 percent of the country’s economy.

Further analysis shows that poorer states are doing worse. States with real per capita income of less than Rs 1 lakh per annum have used just 35.3 percent of their Budgeted capex of Rs 3.9 lakh crore, compared with 39.5 percent in the previous fiscal year.

In the case of richer states, utilisation levels were a tad higher at 37 percent.

States with per capita income of less than Rs 70,000 per annum, like Uttar Pradesh, Bihar, and Jharkhand, were worse on this account.

The gap between utilisation was 6 percentage points compared with 41.6 percent a year back.

On the other hand, rich states with per capita incomes above Rs 1.5 lakh had a 1.5 percentage point gap in utilisation.

In absolute terms, spending of Rs 1.2 lakh crore was 0.6 percent lower in April-October 2024 than in the first seven months of the FY24 fiscal year (April-October 2023). The gap was 6 percent for states with per capita income below Rs 70,000 per annum.

The richest of the rich, or those with per capita income above Rs 1.75 lakh crore, such as Telangana, Tamil Nadu, Gujarat, Haryana, and Karnataka, used 40.5 percent of their budget, compared with 41.2 percent the previous year.