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10th November 2023 (9 Topics)

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.

Verifying, please be patient.

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