Tamil Nadu’s capital expenditure increased by about 31% to ₹5,196.21 crore in the first quarter of 2023-24 from ₹3,976.45 crore in the same period last year, as per the unaudited provisional figures from the Comptroller and Auditor-General (CAG). The State has seen a slight improvement in quality of borrowings, when compared to pre-Covid levels, analysts said.
However, Tamil Nadu’s share in aggregate capex among 20 States went down to 5% in the first quarter of 2024 from 6.7% in first quarter of 2023, India Ratings and Research said in a report.
Capital expenditure is incurred by State governments to create fixed assets such as roads and bridges, irrigation structures, schools, hospitals and investments made in public sector undertakings. It helps improve economic activity and create jobs.
The quality of public expenditure gauged by capital outlay to revenue expenditure (CORE) ratio for Tamil Nadu improved to 8% in the first quarter of 2023-24 from 6.6% in the comparable quarter last year, Paras Jasrai, senior analyst, India Ratings & Research said.
The CORE for 20 States in aggregate terms rose to 13.9% in the first quarter of 2024 from 8.5% in the first quarter of 2023, India Ratings said. This was led by States such as Gujarat, Madhya Pradesh, Odisha, Telangana, Andhra Pradesh and Rajasthan. However, there has also been deterioration in the quality of public expenditure in some of the key states namely Maharashtra, Karnataka, Himachal Pradesh and Chhattisgarh, it noted.
In the first quarter, about 75% of Tamil Nadu’s capex went towards the economic sector which includes transportation, building of roads and bridges and 21.3% went towards the social sector which is health and education, Mr. Jasrai said.
Capital expenditure has been led by States such as Madhya Pradesh, Andhra Pradesh, Gujarat, Telangana and Uttar Pradesh and they together accounted for 56.4% of the aggregate capex in the first quarter of FY2024, with the year-on-year growth of their respective capex being in the range of 81.1% to 489.5%.
The share of Andhra Pradesh and Telangana in the aggregate capex increased to 12.1% and 9.6% during 1QFY24 from 3.6% and 4.0% in 1QFY23, respectively. However, the significant fall in the share of Karnataka and Maharashtra in the aggregate capex during the same period may become a concern if it persists in the remaining quarters of FY24, the ratings agency said.
Tamil Nadu’s first quarter capex is 11.7% of the budgeted amount of ₹44,380 crore for 2023-24, Aditi Gupta, an economist at Bank of Baroda, said in a report.
Tamil Nadu has so far in fiscal 2024 (till August 8) borrowed ₹45,000 crore, compared to ₹35,500 crore in the same period last year, she noted. The State has been the top borrower so far this year.
Mr. Jasrai said there can be different metrics used for measuring the quality of borrowings for Tamil Nadu.
In the first quarter of 2023-24, 62.5% of Tamil Nadu’s borrowing went towards revenue expenditure, when compared to 35% in the same period last year, Mr. Jasrai said.
During the pre-Covid period (1QFY16-1QFY20), 70.9% of the borrowings went towards revenue expenditure. So there has been a slight improvement in first quarter of 2024, he said.
The Centre has so far disbursed ₹4,079 crore under the scheme for providing Special Assistance to States for Capital Investment. Under the scheme, Centre provides financial support to State governments in the form of interest free loans of 50-year tenure subject to fulfilment of some pre-set conditions, Ms. Gupta noted.
