Spending On Economic Services See Decline: Care Rating

New Delhi, October 15: When Bimal Jalan Committee asked the central bank to pass on whopping Rs 1.76 lakh crore to the government, followed by finance minister Nirmala Sitharaman slashing corporate tax rates, the question that came up - would this windfall gain going to translate in any kind of capital expenditure (capex) that may revive the sagging economy?

Capex or capital expenditure is incurred towards social, economic and general services and loans and advances disbursed. Capex, in other words, are funds used by a company or a state to acquire, upgrade, and maintain physical assets such as property, buildings, an industrial plant, technology, or equipment.

A recent report by Care Ratings gives a closer look at capex undertaken by the states and union territories in the last five years. According to the data, capital outlay at consolidated level has increased consistently every financial year. In FY15 the capital outlay, at consolidated level, stood at Rs 2.63 lakh crore. However, in FY 19 the level rose to 4.94 lakh crore.

The report in its break up  of the capital outlay mentions that in FY15, all states and one union territory spent 23 per cent on social services, 72 per cent on economic services and 5 per cent on general services. 

The report further compares that the capital outlay in FY19 is witnessing substantial jump in all sectors  as spending on social service witnessed a jump of 2 per cent to 25 per cent. In general services, spending increased to 73 per cent.

However, on the flip side, the report says, spending on economic services declined in FY19. All states and union territories collectively spent 70 per cent on economic services that is 2 per cent less in comparison to FY15.

In terms of capital outlay as a percentage of total expenditure, Goa ranks the highest with 25 per cent spending, followed by Odisha, Uttar Pradesh, Assam, Bihar with 20, 20, 19, 18 per cent respectively.

Eight states and one union territory (Delhi) have witnessed their allocation towards asset creation decline in FY19 in comparison to FY15, says the report. Uttarakhand, Rajasthan, Gujarat and Delhi’s capex stood at 4-6 per cent lower in FY19 than that in FY15.

Out of the total allocation towards asset creation by various states, transport emerged as the focus area of every state. While it stayed at 25 per cent FY15, it witnessed a decline to 23 per cent in FY19, despite attracting the highest allocation of total capex.

According to the report, while transport remains the first priority of nearly 13 states, irrigation has been the first priority of 6 states for the cumulative period FY15-FY19 (RE). It has been found that many states seem to pay inadequate attention to key areas like health, education, housing and urban development, with their share having ranged between 2-4 per cent of the combined capex.