Since FY14 there has been a decline of ~2 per cent in the overall capital expenditure from various state governments for asset creation. Over the last 5-6 years, the cost of debt has reduced in line with repo rates. The states have curtailed their fiscal deficits over the past couple of years. However, the state bond yield gap versus G-Sec has expanded to ~71bps. States do not have a cushion like the RBI, PSU dividends or disinvestment which the centre turns to in time of need to meet the fiscal deficit target. Weak revenue growth is curtailing expenditure growth. The Central government has promised a 14 per cent GST revenue growth to states, the GST cess shortfall will need to be borne by the central government.