Thirteen states, beneficiaries of the center's interest-free loans, are poised to increase their capital expenditure by an estimated 29% YoY, reaching ₹6.2 trillion in FY24, reports Icra Ltd. This projection, however, falls slightly below the budgeted estimate of ₹6.7 trillion. These states are expected to face revenue shortfalls, leading to higher revenue and fiscal deficits compared to the budgeted figures.
Debt levels are also anticipated to rise to 30% of their Gross State Domestic Product (GSDP) in FY24. The central government's interest-free capex loan scheme, initiated in response to early pandemic challenges, has disbursed ₹400 billion of the allocated ₹800 billion for the current fiscal year. Another ₹300 million is slated for release upon demonstration of state reforms or project proposals. Sixteen states have chosen to participate in the loan scheme for FY24.