Tamil Nadu’s spending on infrastructure increased by about 26.7% in fiscal 2020-21, when compared to fiscal 2019-20, despite a challenging situation caused by the first wave of pandemic.
The State’s capital expenditure which goes into infrastructure projects was ₹32,473.76 crore in 2020-21, according to provisional un-audited figures from the Comptroller and Auditor General (CAG).
The capital expenditure was lower than the ₹37,734.42 crore projected in the revised estimates for 2020-21 in the interim budget presented by the AIADMK government before the assembly polls. However, it showed an increase from ₹25,631.58 crore spent in 2019-20.
“The increase in capital expenditure is positive and required as the government has to spend to keep the economy moving. It helps to sustain industry by providing demand and hence employment,” Madan Sabnavis, chief economist, CARE Ratings said.
“Though the capital expenditure incurred by the state is lesser than the revised estimates for 2020-21, the increased spending when compared to 2019-2020, would have helped to minimise the impact on economic growth,” Aditi Nayar, chief economist at ratings firm ICRA Ltd said.
She also pointed out that the recovery in the state's revenue collection in the second half of fiscal 2020-21, also helped in boosting the capital expenditure.
According to the interim budget, the state government acting on the recommendation of the High Level Committee chaired by Dr. C. Rangarajan had sanctioned capital works- irrigation, construction of buildings, roads and highways, housing, water supply and sanitation amounting to ₹20,013 crore over and above the provisions made in the budget estimates for 2020-21.
The Rangarajan committee had recommended incurring capital expenditure of at least ₹10,000 crore additionally in 2020-21.
As a result of these measures taken by the Government, Tamil Nadu is expected to register a positive growth rate of 2.02 % in 2020-21. This is against an All India negative growth rate of 7.7 % in 2020-21, the interim budget had pointed out.
The State has projected a capital expenditure of ₹43,170.61 crore for 2021-22. However, this would depend on how much impact will the second wave of pandemic have on the state’s revenue collections.
Ms. Nayar said for the current fiscal it is uncertain how long the second wave of the pandemic would persist.
The impact on finances would vary across states in FY2022. The impact on economic activity would be based on the spread of the infection and the vaccination coverage, she added.
The exact picture would be known when the new DMK government presents its first full budget.