State capex strongly impacts people’s quality of life: Ind-Ra

New Delhi, Nov 30 (Agency) Noting that state governments’ capex has significant impact on quality of people’s life and productivity, India Ratings and Research (Ind-Ra) on Thursday said that states will continue to play an important role in boosting the capex and in turn the economic growth of the country. “This could be gauged from the fact that during FY11-FY18 (BE), nearly three-fourths of the combined developmental capex by the centre and states was incurred by state governments,” the research and rating firm said. Devendra Kumar Pant, Chief Economist and head Public Finance, Ind-Ra noted that state governments capex has been providing support to general government capex. “The state government capex is focused towards not only the creation of physical infrastructure such as roads, irrigation, power etc., but also improving the quality of life – health, urban development – and trained labour force (education).

While physical infrastructure is important from the growth point of view, an educated labour force helps in sustaining growth by quick adaptation of newer technology” he said. As per Ind-Ra, developmental capex of four sectors namely, social and community services (average proportion of states’ developmental capex in total developmental capex of centre and states during FY11-FY17 (BE): 89.2%), agriculture and allied services (93.3%), power, irrigation and flood control (96.5%) and public works (92.7%) is almost entirely incurred by states. On the other hand, states’ share in developmental capex in general economic services (39.3%), industry and minerals (46.0%) and loans and advances (40.7%) is less than half of the aggregate developmental capex by the centre and states. “States’ share in the combined developmental capex of the centre and states, which was more than 80% during FY10-FY14, gradually declined to 58.4% in FY18 (BE). This could be due to aggressive road development programme by the National Highways Authority of India, which has resulted in high leverage of NHAI,” the research firm said.