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The share of revenue expenditure in total expenditure for 10 states lies in the range of 80-90%; such high revenue spend results in poor spending quality, especially when it comes to capital and developmental activities.
While the impact of revenue spending on economic activity lasts for just a year, the impact of capital outlay is stronger and lasts for much longer, according to a study by the Reserve Bank of India.
States with high revenue spending and low capital spending will have slower revenue growth and will see much higher interest outgo.
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