Fiscal Profligacy in Poll-Bound States Poses Risk to Capital Expenditure, Warns Swiss Brokerage

A Swiss brokerage has warned that fiscal profligacy in states approaching elections could affect capital expenditure. The report by UBS Securities highlighted that Maharashtra, Madhya Pradesh, Rajasthan, and Odisha have raised their fiscal deficit targets. Populist spending is expected to widen fiscal deficits, potentially influencing future capex.

A Swiss brokerage has sounded the alarm over fiscal profligacy in poll-bound states, warning that increased welfare spending could compromise future capital expenditure.

A report by UBS Securities pointed out that 11 states have elections soon, with four major states—Maharashtra, Madhya Pradesh, Rajasthan, and Odisha—raising their fiscal deficit targets.

Increased spending on populist measures as elections approach could widen fiscal deficits and impact capital expenditure, the brokerage cautioned, noting that the RBI is unlikely to cut rates until December.

(With inputs from agencies.)