₹3 lakh crore of public money sitting idle with states
What's the story
An analysis by Emkay Global, a Mumbai-based brokerage firm, has found that the top 19 Indian states are sitting on almost ₹3 lakh crore of public money.
The report says that these states have reduced their capital expenditure while they have continued to borrow for the same purpose.
As a result, an estimated ₹2.9 lakh crore was lying unspent at the state government level across India.
Economic impact
Unspent funds could boost India's economy
The unspent state-level funds amount to almost 28% of the Union government's total capital expenditure outlay for the fiscal year 2025, which is ₹10.1 lakh crore.
If released in the next few months, they can give a much-needed push to India's economy.
The Emkay Global report argued that the idle cash lying around could drive economic growth if used properly.
Capex status
Several states have over half their capex budget unspent
The Emkay report dated March 18 states that at least five Indian states have not yet expended more than half of their capex budget.
Maharashtra has the highest percentage of unspent planned capital expenditure (capex) among at least five Indian states, according to the report.
While 59% of Maharashtra's planned capex is unspent, Bihar (58%), Andhra Pradesh (55%), Uttar Pradesh (52%), and West Bengal (52%) follow closely.
Fiscal constraints
States reluctant to spend due to high debt levels
The Union government had earmarked ₹1.1 lakh crore to be lent interest-free (for 50 years) to state governments in the fiscal year ending March 2025.
But till January end, only ₹29,850 crore (27%) of such loans had been used.
High debt and fiscal deficit are being cited as reasons behind states' reluctance to spend this money.
Disbursement changes
SNA-SPARSH system aims to curb idling of borrowed money
The new system, SNA-SPARSH, was launched in January 2024 to check the idling of borrowed money. It has already resulted in saving ₹26,000 crore in interest costs, claims Finance Minister Nirmala Sitharaman.
However, there are tough conditions for receiving funds through this system. For example, central government assistance can't be availed unless 75% of earlier released funds have been utilized.
Loan impact
Unspent capex has created another vicious cycle
Unspent capital expenditure has led to another strenuous cycle.
Interest on the idle money lying in the single nodal agency (SNA) account will go back to the central exchequer at the end of March 2025.
State governments are likely to carry a significant chunk of cash into the new fiscal year starting in April instead of waiting for fresh approvals from either the Centre or RBI.