India Economy I State Budgets 2024-25 - Capex At All-Time High Of 2.7% Of GDP In FY24: Motilal Oswal

Motilal Oswal Report

Key highlights from the 2024-25 state budgets

Our analysis of 2024-25 budgets of 20 large states confirms that states have budgeted a fiscal deficit of 3.2% of gross domestic product in FY25 versus 3.5% of GDP in FY24RE and 2.8% of GDP each in FY22/FY23.

Gross market borrowings of all states are budgeted at Rs 10.9 trillion (3.3% of GDP) and net market borrowings are budgeted at Rs 8.0 trillion (2.4% of GDP) in FY25. According to the RBI’s data, actual state GMBs/NMBs stood at Rs 9.6 trillion/Rs 68 trillion (or 3.3%/2.3% of GDP) last year.

Outstanding debt of states is budgeted to grow 9.2% YoY, taking it to 28.3% of GDP in FY25, slightly lower than 28.6% of GDP in FY24RE. States’ debt was at a 15-year high of 31% of GDP in FY21, up from ~25% of GDP in the pre-Covid years.

Aggregate receipts of all states are budgeted to grow 9.0% YoY in FY25, following 16.8%/12.4% growth in FY24RE/FY23. Interestingly, the entire growth is likely to be led by states’ own receipts, as the Center’s support is expected to grow only 3% YoY in FY25. Total receipts are, thus, budgeted to ease slightly to 14.2% of GDP in FY25, down from an all-time high of 14.4% of GDP in FY24RE.

Total spending of states is budgeted to grow only 7.4% YoY in FY25, following 20.3%/12.7% growth in FY24RE/FY23. While revenue spending is budgeted to grow just 7.3% YoY, capital spending is budgeted to increase 8.1% YoY in FY25. Total spending is budgeted to fall to 17.3% of GDP in FY25 (second to the peak of 17.8% of GDP in FY24RE), though capital spending is budgeted to stay unchanged at ~3% of GDP.

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