States' Capital Outlay Rises Amidst Moderate Revenue Spending

Public capital expenditure is vital for India's economic growth, particularly as private investment remains subdued. A review of 18 states reveals a robust 10% year-on-year increase in capital expenditure (capex) during April-October of the current financial year, amounting to Rs 3 lakh crore. This marks a significant turnaround from a 7% contraction observed in the same period last year.

The Centre's own capital spending has also seen a dramatic rise, with a 40% year-on-year increase in the first half of FY26. This substantial growth in public capex, encompassing central government, state governments, and Central Public Sector Enterprises (CPSEs), is underpinning India's gross fixed capital formation.

Complementing the capex surge, states have exhibited fiscal prudence. Borrowing and other liabilities for the 18 reviewed states decreased by 8% on-year in April-October FY26. This financial discipline is reflected in a modest 4% growth in revenue expenditure, a significant deceleration from the 14% growth seen in the prior year, suggesting a focused allocation towards developmental projects.