Road CAPEX in top 15 states up by 8 percent this fiscal

Budget analysis of the top 15 states, which account for 85 percent of the total state road CAPEX, indicates they have cumulatively budgeted for an 8 percent increase in CAPEX on roads and bridges at Rs 1.26 lakh crore in this fiscal as compared with the revised estimate for the last financial year, CRISIL Research said in a report.

Budget analysis of the top 15 states, which account for 85 percent of the total state road CAPEX, indicates they have cumulatively budgeted for an 8 percent increase in CAPEX on roads and bridges at Rs 1.26 lakh crore in this fiscal as compared with the revised estimate for the last financial year, CRISIL Research said in a report. The budgeted increase is much lower than the bumper 39 percent on-year increase last fiscal, after constrained spending in the previous two when these states achieved only 92-94 percent of their road budgets, first due to the economic slowdown in fiscal 2020 and then due to diversion of funds towards health and social expenditures to fight the COVID-19 pandemic in fiscal 2021.

The revised estimate for fiscal 2022 shows a 97 percent achievement. However, given that actuals have historically been much lower, we estimate the actual increase in spending in fiscal 2022 at 28-32 percent on-year, CRISIL Research said. It, however, mirrors the compound annual growth rate of 9 percent in the last five fiscal (fiscal 2017 actuals to fiscal 2022 revised estimate).

In the current fiscal, we expect 90-95 percent achievement of these state road budgets, a growth of 6-8 percent on year, given that high spenders such as Maharashtra have moderated their road spending to lower their fiscal deficits. Plus, states in high fiscal zones, such as Bihar and Madhya Pradesh, have lowered their spending on roads, CRISIL Research said. On the other end, the likes of Odisha and Andhra Pradesh, which have been laggards in spending on roads over the past 5 years, have now budgeted for much higher spending for road development. Uttar Pradesh and Rajasthan, too, have budgeted for double-digit growth in their spending on roads given the relatively lower road density in these states, it added.