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27
December 2018
 |
India Ratings (The Total Investment & Insurance Solutions)
India Ratings and Research has said farm loan
waivers announced by a number of states recently will adversely impact the
combined state government capex spending. “State government capex is major
driver of investment growth in the Indian economy, and historically, it has
been higher than capex undertaken by the central government.
It is budgeted to be higher by 37.5% for FY19
and was 36.6% higher as per FY18RE,” it said in a statement on Thursday. The
rating agency observed that contrary to popular belief, a significant part of
the additional revenue awarded to the states by the 14th Finance NSE 0.55 %
Commission was spent on capex.The Total
Investment & Insurance Solutions
As a result, the combined capex of state
governments increased to 3.1% of GDP in FY16 from 2.4% in FY15, it said. During
the same period, the central government’s capex increased to 1.8% of GDP from
1.6% of GDP. In the subsequent years, the combined state government capex has
remained at 3.0% of GDP or higher, it added.
Despite revenue receipt surpassing the
budgeted amount, these states could not keep the revenue deficit at the
budgeted level, as the farm loan waivers led to a rise in revenue expenditure,
it said. The Total Investment &
Insurance Solutions
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