Economics
Cash-Strapped States Threaten India’s Double-Digit Growth Goal
- Modi is boosting infrastructure spend to help economy grow 11%
- But states are cutting capital expenditure due to cash crunch
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Prime Minister Narendra Modi’s plan to boost capital expenditure to help India regain the fastest-growing major economy title risks being derailed by the nation’s cash-strapped states, which are cutting back on such spending.
The nation’s 28 states, which account for about 60% of total government expenditure on infrastructure and asset creation, are hamstrung by declining tax revenue and the cost of fighting the Covid-19 pandemic. Also, unlike the federal government, provinces don’t have the flexibility to borrow more to maintain spending as that would lead to a fiscal deficit blowout.