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States' Capital Spending to Surge 12% in FY27
6 Nov
Summary
- State capital expenditure projected to rise 10-12% to Rs 8.5 lakh crore.
- Higher central assistance, particularly SASCI scheme, drives spending.
- Urban infrastructure and roads to see significant investment.
States' capital expenditure is projected to see a significant increase of 10-12% in fiscal year 2027, reaching an estimated Rs 8.5 lakh crore. This upward trend is largely attributed to increased central government assistance and improved fiscal flexibility available to the states.
The Special Assistance to States for Capital Investment (SASCI) scheme is a key enabler, with its allocation rising by 33% to Rs 2 lakh crore. This scheme offers states 50-year interest-free loans, providing substantial room for investment beyond their regular borrowing capacities.
Infrastructure development, particularly in urban areas and transportation, will be a major focus. Urban infrastructure, including water supply, sanitation, and housing, is expected to experience high double-digit growth. Transport infrastructure, primarily roads and bridges, will continue to be a significant component of capital outlay.
Crisil Ratings highlights that efficient fund utilization and adherence to SASCI-linked conditions will be vital for achieving these spending targets. Potential constraints include higher borrowing costs and weaker revenue growth.
