States are set to spend less on road and bridge construction in this financial year, even as the Centre pushes ahead with spending on infrastructure creation.
The combined capital expenditure of the 16 large states, which account for 80% of the country’s gross domestic product (GDP), on roads and bridges will fall to 0.58% of the gross state domestic product, compared to 0.61% in the previous fiscal, according to their budgets.
In contrast, the Centre’s spending is set to rise to 0.86% of the GDP in 2023-24, from 0.76% in the previous year.
The overall spending of 16 states and the Centre will be 1.44% of the GDP this fiscal, with the Centre is expected to spend ₹2.59 lakh crore on road infrastructure while the combined budgeted spending of 16 states is ₹ 1.42 lakh crore.
The analysis does not include data from Tamil Nadu, Chhattisgarh, and north-eastern states, except Assam, hilly areas and Union territories.
Further analysis shows that spending has become more concentrated. The largest three states will account for nearly half of the expenditure by 16 states between 2021-22 and 2023-24, up from 45.7% between 2013-14 and 2015-16.
Uttar Pradesh, Maharashtra and Gujarat will spend the highest on road infrastructure this fiscal.
An ET analysis showed that states’ spending on roads and bridges as a proportion of GSDP has remained static at around 0.5% for the past decade. The Centre’s spending on roads and bridges is expected to increase 4.3 times from a meagre 0.2% of the GDP in 2015-16.
In absolute terms, the Centre’s capital expenditure on roads has increased at a compound annual growth rate of 32.3% since 2015-16, whereas the growth in states has been just 11.2%.
Experts highlighted that fiscal constraints, revenue expenditure and focus on the agricultural economy may be a cause for states spending less on roads and bridges, despite such infrastructure investments having a larger multiplier effect. “States do not have the money; they are more constrained by the fiscal deficit number under the Fiscal Responsibility and Budget Management Act. They cannot compromise on revenue expenditure either,” said Madan Sabnavis, chief economist, Bank of Baroda.
States tend to spend more on infrastructure for the rural sector, agriculture and irrigation, said Sabnavis. “Spending on roads and bridges is not a priority,” he said.
“States are reluctant to utilise all the permitted borrowing, as they are reluctant to increase fiscal deficit,” said DK Srivastava, chief policy adviser, EY India.
Jagannarayan Padmanabhan, senior director – consulting, CRISIL Market Intelligence and Analytics, said the reclassification of roads is also a cause for lower spending. “Over time state highways get handed over to NHAI (National Highways Authority of India) and they get converted to NHs – increase in traffic being one of the key considerations. In this way the expenses of converting a state highway to national highway lies with the NHAI and the maintenance cost also gets transferred to the NHAI.”
