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With increased emphasis on Capital expenditure, States spending has been better
Context:
Capital expenditure of 23 states grew by 52% in April-September 2023 over same period last year.
Key Highlights-
- Capital Expenditure Growth:
- Substantial Improvement in Expenditure Quality.
- States Prioritize Development with 52% Growth.
- Varied Spending Patterns Across Indian States.
- Fiscal Performance Variations:
- Fiscal Deficit Budgeted at Rs 9.6 Lakh Crore.
- States Like Gujarat and Maharashtra Achieve Fiscal Surplus.
- Concerns in States Exceeding Budgeted Fiscal Deficit Targets.
- Revenue Receipts and Tax Growth:
- 14 States Surpass 40% of Budgeted Revenue Receipts.
- Gujarat Leads in Revenue Performance.
- Double-Digit Tax Growth, but Contractions in Some States.
- Comparative Positioning of States:
- States Balancing Fiscal Deficit and Capital Spending.
- Importance of Capital Expenditure for Fiscal Health.
- Analysis Indicates Varied Fiscal Landscapes Across States.
Effects of Increased Capital Expenditure and Decreasing Fiscal Deficit –
- Stimulates Economic Growth:
- Higher capital expenditure often involves investments in infrastructure, industries, and developmental projects.
- This spending can stimulate overall economic activity, leading to higher GDP growth.
- Job Creation:
- Capital projects, such as infrastructure development, require labor, leading to job creation.
- Increased employment can boost consumer spending, further contributing to economic growth.
- Improved Productivity:
- Capital expenditure in technology, machinery, and innovation can enhance productivity.
- Improved productivity can result in higher output and efficiency across various sectors.
- Enhanced Competitiveness:
- Investments in technology and innovation can make industries more competitive globally.
- Increased competitiveness can lead to higher exports and a favorable trade balance.
- Positive Investor Sentiment:
- Decreased fiscal deficit signals responsible fiscal management.
- Positive investor sentiment can attract both domestic and foreign investments.
- Infrastructure Development:
- Capital expenditure often involves investments in critical infrastructure like roads, bridges, and energy.
- Improved infrastructure can reduce logistics costs, enhance connectivity, and attract business investments.
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