States Boost Capex: Public Investment Surges 16% in FY26

States' capital expenditure (capex) demonstrated a marked acceleration in the first three quarters of FY26, reaching roughly ₹4.62 lakh crore. This represents a robust 16% increase compared to the previous fiscal year, a significant turnaround from a modest 3% decrease observed in the April-December period of FY25. This surge indicates a renewed focus on public investment and project execution.

The recovery, however, is not uniform across all regions. Large industrial states are spearheading the upswing. Madhya Pradesh, Gujarat, Maharashtra, and Telangana have reported substantial increases, some with very high growth rates. Andhra Pradesh notably doubled its capex, potentially indicating delayed projects or a major investment cycle.

Conversely, some states are facing fiscal constraints or project timeline shifts, leading to contractions in their capex. Uttar Pradesh, despite being a large spender, recorded a notable decline. West Bengal, Himachal Pradesh, Punjab, and Chhattisgarh also saw double-digit decreases.

Revenue expenditure growth has slowed to 8% from 24% a year prior, suggesting improved expenditure control. Tax revenue growth eased to 9% from 14%, yet states increased borrowings by 15% to finance their investment push. This pattern indicates a strategic rebalancing toward asset creation.