Saturday, February, 15,2025

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Delhi, Punjab, Kerala & Puducherry spend more on day-to-day expenses rather than investing in capex: RBI report

New Delhi: Populist schemes such as free electricity, free transport, and monetary assistance programs are impacting the financial health of States and reducing their ability to invest in critical infrastructure, according to the Reserve Bank of India's (RBI) latest report.
It said, "Several States have announced sops pertaining to farm loan waiver, free electricity to agriculture and households, free transport, allowances to unemployed youth and monetary assistance to women in their Budget for 2024-25."
The report highlighted that in the 2024-25 Budget, several States announced various populist measures while these measures aim to provide immediate relief to targeted groups, they significantly strain State finances, the RBI warned.
"Such spending could crowd out the resources available with them and hamper their capacity to build critical social and economic infrastructure," the report noted.
The RBI also pointed out the growing challenges posed by high debt-to-GDP ratios, outstanding guarantees, and the increasing subsidy burden.
It urged States to focus on fiscal consolidation and prioritize developmental and capital spending. This, the RBI emphasized, would ensure long-term financial stability while meeting the infrastructure needs of the economy.
It said, "The increasing subsidy burden requires States to persevere with fiscal consolidation while laying greater emphasis on developmental."
However, the report also highlighted that the revenue expenditure-to-capital outlay (RECO) ratio exceeds 10 in some States, leaving limited scope for capital investments. It includes Punjab, Delhi, Kerala and Puducherry.
It said, "The RECO ratio exceeds 10 in some States, constraining their scope for capital expenditure"
The State-wise RECO Ratio refers to the Revenue Expenditure to Capital Outlay Ratio for individual states. It is a financial metric used to assess how much a state government spends on revenue expenses (day-to-day operational costs) compared to its investment in capital outlay (infrastructure development and asset creation).
A high RECO Ratio of more than 10 indicates that a state is spending significantly more on revenue expenses compared to capital outlay. It suggests a limited focus on infrastructure and developmental spending, potentially constraining long-term growth. High ratios can also point to fiscal inefficiencies and excessive focus on non-asset-creating expenditures.
The RBI's report underscores the need for States to strike a balance between welfare measures and investments in critical infrastructure, ensuring sustainable growth and financial stability in the long run.

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Daily Astro

15-02-2025

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Aries

Today brings opportunities for growth, but you'll need to stay focused. Trust your instincts to navigate challenges.

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Pisces

Your intuition will guide you. Trust your feelings and explore creative outlets for peace of mind.

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Aquarius

Innovation is your theme today. Explore unconventional ideas to solve lingering problems.

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Capricorn

Hard work pays off today. Your dedication and discipline will lead to well-deserved recognition.

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Sagittarius

Adventure is calling! Embrace new opportunities, but keep a balanced approach to risks.

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Scorpio

Your determination will be unmatched. Dive deep into tasks, but don't forget to take breaks to recharge.

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Libra

Harmony in relationships is your priority. Compromise and understanding will strengthen your bonds.

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Virgo

Focus on organization and details. A well-planned day will lead to productive results and personal satisfaction.

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Leo

Leadership will come naturally. Take charge of situations but remain humble for the best outcomes.

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Cancer

Emotional balance is key today. Spend quality time with loved ones to find comfort and clarity.

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Gemini

Today is perfect for networking and sharing ideas. Your adaptability will help you tackle unexpected changes with ease.

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Taurus

Patience will be your strength today. Financial matters might need attention, so think twice before making big decisions.

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15-02-2025