The capital outlay of India’s leading 18 states is expected to grow by 7-9% to approximately Rs 7.2 trillion in FY 2024-25, according to Crisil Ratings. This increase builds on a strong 27% rise in FY 2023-24, when the total outlay reached Rs 6.7 trillion. Key sectors driving this expansion include transport, water supply, sanitation, housing, and urban development, with modest growth projected for irrigation.

These 18 states account for nearly 94% of India’s total capital outlays, with this year’s outlay expected to remain at 2.4% of gross state domestic product (GSDP), consistent with last year but above the 2.0-2.3% range observed between FY 2018 and 2023.

Crisil Ratings noted that states will have the fiscal capacity to sustain these capital expenditures, supported by increased Goods and Services Tax (GST) collections, higher shares of central taxes, and interest-free loans for capital spending from the central government. This fiscal year, the Centre has raised its allocation for interest-free capex loans to states from Rs 1.3 trillion to Rs 1.5 trillion, with 80% of last year's funds successfully disbursed to state governments.

Anuj Sethi, Senior Director, Crisil Ratings, commented, "We anticipate a 7-9% increase in capital outlay, allowing states to meet around 90% of their budgeted targets this fiscal. This would exceed the 82-84% fulfilment rate seen between fiscals 2018 and 2023." (ET)