With a clutch of states expected to clock in a slower pace of aggregate revenues in 2018-19, the casualty could be either their capital expenditure (capex) or their deficits. For a group of 13 states, aggregate revenues are forecast to grow at 14.4% compared with a far better 21.3% in 2017-18. The muted revenue growth, a study by Icra reveals, is thanks to a smaller increase in grants from the Centre and a slower rise in the tax revenues that states collect themselves. However, taxes devolving from the Centre are tipped to see a bigger increase—up 14.1% from 11%.Also, the non-tax revenues which states generate on their own are expected to rise at a much faster 18.7% in 2018-19 compared with an increase of 9.2% in 2017-18. In the absence of clarity on the data, economists at ICRA point out the SGST (state GST) revenues projected by some states are optimistic. Uttar Pradesh, for example, has budgeted for a 29% increase in own tax revenues on a 10% rise in 2017-18. While it is reasonable for states to project SGST revenue growth up to 14% since they will get compensation from the Centre for any shortfall from that level, many states have estimated much higher growth rates.Also, while these states may have pencilled in a meaningfully bigger increase in capex relative to revenue expenditure, the share of capital spending in total expenditure would improve only slightly in 2018-19 to 15.1% from 14.4% last fiscal.While some states such as Maharashtra and Uttar Pradesh are understood to taken care of the bulk of the expenses on farm loan waivers in 2017-18, around 15-20% of the bill is to be paid this year. As such, the quality of expenditure in 2018-19 would improve only slightly. Even this marginal improvement, however, may not materialize given the assembly elections are due in four states including Rajasthan and Chattisgarh towards the end of 2018. Since the model code of conduct would kick in as soon as the polls are announced, spends could turn out to be more subdued than planned. Rajasthan, for instance, has budgeted a slow10% increase in spending, albeit on a high base in 2017-18, when the fiscal deficit slipped to 3.5%.There is a good chance state governments may fork out more for borrowings from the bond markets this year unless the demand from local banks, insurers and other institutional investors is strong. Already benchmark yields are elevated and ruling in the region of 7.3-7.4%; any shortage of liquidity or weaker demand from banks could drive up yields. Also, Reserve Bank of India (RBI) has increased the investment limit for foreign portfolio investors (FPI) in central government securities by 0.5% annually, taking the limit to 5.5% in FY19 and 6% in FY20.However, it has left the limit for FPIs in State Development Loans (SDLs) unchanged at 2% of outstanding securities. Total market borrowings by state governments for the April-June quarter is expected to be in the range of Rs 1.16-1.28 lakh crore ICRA’s analysis is based on the FY2019 Budgets of13 states — namely Andhra Pradesh, Bihar, Chhattisgarh, Gujarat, Haryana, Kerala, Maharashtra, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh and West Bengal.