States may cut FY21 capex by Rs 3 lakh crore, says ICRA

ICRA has projected that the gap between the GST compensation requirement and the cess collections for FY21 will be Rs 2.9 lakh crore

Chennai: Despite the two options for additional borrowing put forth by the Centre, capital spending may have to be curtailed by the  states in FY 2021 by  Rs 1 lakh crore to 3.4 lakh crore after  taking  into  account  the  anticipated  shortfalls  in  GST compensation and Central tax devolution (CTD), finds ICRA.

While offering two borrowing options, the Centre had pegged the GST compensation requirement of the state governments at Rs 3 lakh crore for FY2021 and the expected GST cess collections at Rs 65,000 crore, implying a gap of Rs 2.35 lakh crore.

 However, ICRA has projected that the gap between the GST compensation requirement and the cess collections for FY21 will be Rs 2.9 lakh crore, higher than Centre’s estimate of Rs. 2.35 lakh crore.

 Analysing both options, ICRA estimates that in the current fiscal year, state governments would see fiscal deficit of a minimum of 4.25 per cent and maximum up to 5.52 per cent of GSDP .