Hyderabad: The capital expenditure growth as projected in Andhra Pradesh budget for the current financial year (April 2022 to March 2023 period) is unrealistic and difficult to achieve, sovereign rating agency India Ratings said in a note on Thursday. “Capex growth both in FY21 and FY22, like other states, had been a major casualty even in Andhra Pradesh due to the COVID-19 pandemic related disruption in the economy,” India Ratings said in a note sent to ETV Bharat.
Capital expenditures are those expenditures that lead to the creation of assets such as the construction of roads, schools, and hospitals among other such things as against revenue expenditure such as payment of salary and wages and subsidy payment that does not lead to creation of any assets. Increased capital expenditure is considered crucial for faster GDP growth and employment generation.
India Ratings, which is part of sovereign rating agency Fitch Group, said Andhra Pradesh’s capital expenditure in the last financial year (April 2021- March 2022 period) as per the revised budget estimates was Rs 197.30 billion, which is 38.5% lower than the budget estimate for the last year. The agency said the capital expenditure has been budgeted to grow to Rs 317.25 billion in FY 2022-23, which is an increase of 60.80% year-on-year over the revised estimates for the last financial year (FY 2021-22).
“Although the annual growth looks too steep, the FY23 budgeted Capex growth over FY22 (BE) works out to be only 4.15%,” said the agency. “In view of the government of Andhra Pradesh’s Capex growth during FY17-FY21RE being only 6.8%, India Ratings believes FY23 budget estimate for Capex is unrealistic and difficult to achieve,” noted the agency.
The agency said the current financial year (April-2022 to March 2023 period) with regard to the capital expenditure of the state was going to be no different than the last financial year which ended last month.
Andhra’s fiscal deficit to be around 3%
According to the agency, the fiscal deficit of Andhra Pradesh in the current financial year is expected to come in at around 3% of the gross state domestic product (GSDP), lower than the projected 3.6% of GSDP (Rs 487.24 billion) in this year’s state budget.
“This is due to the optimistic assumptions regarding Capex by the state. Nevertheless, this is well-within the limits prescribed by the 15th Finance Commission and agreed upon by the union government, 4% of GSDP of which 0.5 per cent will be tied to power sector reforms,” said the agency. India Ratings said Andhra Pradesh budget estimate that its revenue deficit would be at around Rs 170.36 billion (1.3% of GSDP), looked realistic.
