Tamil Nadu’s capital expenditure increased 31% in Q1, 2023-24

Tamil Nadu's capex up 31% in 1QFY24; quality of borrowings slightly improved. CORE ratio rose to 8% from 6.6% in 1QFY23. 75% of capex went to economic sector, 21.3% to social sector. 56.4% of aggregate capex led by Madhya Pradesh, Andhra Pradesh, Gujarat, Telangana & Uttar Pradesh. 62.5% of borrowings went to revenue expenditure, slight improvement from pre-Covid levels. Centre disbursed ₹4,079 crore under Special Assistance to States for Capital Investment.

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%.