State finances show worrying trend: Report

"For the first five months of FY20, while capital expenditure grew only 0.6 per cent year-on-year, core revenue spending (excluding interest payments) grew 7.6 per cent YoY. Thus, the total spending of states grew at a nine-year low of 5.8 per cent in Apr-Aug'19," brokerage firm Motilal Oswal said in a report.

New Delhi:Reflecting slowdown in the economy, monthly finances of 17 state governments show a worrying trend with total receipts growing only 4.1 per cent in the first five months of the current fiscal, compared to the same period a year ago.

"For the first five months of FY20, while capital expenditure grew only 0.6 per cent year-on-year, core revenue spending (excluding interest payments) grew 7.6 per cent YoY. Thus, the total spending of states grew at a nine-year low of 5.8 per cent in Apr-Aug'19," brokerage firm Motilal Oswal said in a report.

Total taxes collected by 17 states grew 15.8 per cent YoY in Aug'19, marking their fastest growth in eight months, as per the report.

"In fact, states' taxes have been volatile in FY20; taxes declined for the first time in 14 months in May'19 (-10.6 per cent), then grew slightly in Jun'19 (+3.6 per cent) before declining sharply again in Jul'19 (-12.1 per cent)," the brokerage said.

The cumulative data for the first five months of FY20, however, does not show encouraging signs. Tax receipts of 17 states grew only 1.4 per cent YoY in Apr-Aug'19. But as a result of faster growth in grants-in-aid from the Centre, states' total receipts grew 4.1 per cent YoY during the period.

There are, however, striking divergences among the states. West Bengal, Jharkhand, and Haryana saw more than 20 per cent growth in total receipts, while Uttar Pradesh and Andhra Pradesh saw sharp declines in Apr-Aug'19.

"Although states' receipts and spending were subdued in the first five months of FY20, higher growth in spending (in YoY terms) has led to a higher fiscal deficit in FY20 year to date," the brokerage said.