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States' Capital Spending Caps: 5 Sectors Max for FY27
25 Jun
Summary
- States must limit capital expenditure proposals to five priority sectors.
- Scheme aims for concentrated investments and measurable development outcomes.
- ₹70,000 crore allocated to states and UTs for FY27 under SASCI scheme.
The Department of Expenditure has instructed states and Union Territories to restrict their proposals under the Special Assistance to States for Capital Investment (SASCI) scheme to a maximum of five priority sectors for FY27. This policy aims to foster concentrated investments that yield measurable development outcomes, moving beyond mere encouragement of higher capital expenditure.
The objective is to guide states towards focused spending, preventing the dilution of resources across too many projects. States will retain the flexibility to select their priority sectors based on specific needs, drawing from a wide array of development indicators identified within the scheme.
For FY27, the SASCI scheme's Part-I has an outlay of ₹75,000 crore, with ₹70,000 crore distributed among states and UTs based on the 16th Finance Commission's recommendations. Uttar Pradesh received the largest share at ₹11,805 crore.
Economists view this focused approach as a positive shift toward outcome-oriented fiscal federalism, expecting it to improve the quality and impact of capital investments rather than just increasing allocations. The scheme has been instrumental in helping states maintain capital expenditure around 2.4% of GDP.
