Like the Centre, leading states except Karnataka are set to miss the budget target of capital expenditure for the current fiscal year, data from budget documents showed. However, most leading States have made a big push for capital expenditure in the next fiscal year i.e., 2025-26, starting April 1.
Meanwhile, Union Finance Ministry has lowered the amount to be given as 50 years interest free loan under ‘Special Assistance to the States for Capital Investment/Expenditure (SASCI)’ to ₹1.25 lakh crore for the current fiscal from ₹1.5 lakh crore mainly due to the fact that states have not been able to carry reforms to utilise such money.
Budget documents of 8 key States showed that Maharashtra and Karnataka upped the revised estimate for capital expenditure for FY25. For the next fiscal, barring Maharashtra, all leading States raised the expenditure in the range of 12 to 69 per cent.
Source: States’ Budget Documents, Research Reports
Recognising the importance of the capital expenditure, Chief Minister of Karnataka Siddaramaiah, in his budget speech said, “Our Government acknowledges the decisive role of the infrastructure sector in driving the State’s holistic economic growth and has provided substantial funding for capital expenditure in the current year.”
Though Tamil Nadu lowered the revised estimates of Capital Expenditure for the current fiscal to ₹46,766 crore from the budget estimates of ₹47,681 crore, it said it is committed to giving big push to capital expenditure not just in FY26 but in coming years as well.
Presenting the budget, Thangam Thenarasu, Minister for Finance, Tamil Nadu announced, “In line with the government’s push for capital expenditure, the capital expenditure is projected to be ₹71,538.70 crore in 2026-27 and .₹89,423.38 crore in 2027-28. This shows the commitment of the State to constantly improve the allocation for growth-oriented expenditure while maintaining fiscal discipline.”
Maharashtra was only State among the selected 8 which lowered the budget estimate of capital expenditure for the next fiscal as compared to the revised estimates for the current fiscal. However, it hiked the revised estimate to over ₹1.09 lakh crore which pushed overall expenditure.
“The increase in the revised estimate for total expenditure in the year 2024-25 is due to the rise in spending on capital and welfare schemes,” Ajit Pawar, Deputy Chief Minister and Finance Minister of Maharashtra said.
States’ borrowings are on rise in the current fiscal. In a research report, Emkay Global said that States’ SDL (State Development Loan) borrowings have risen sharply in March -25 vs their indicative calendar – so far, states have borrowed ₹1.5 lakh crore as against indicative calendar of ₹1.2 lakh crore.
“While this is not a new trend (March has accounted for 18 per cent of total annual gross borrowing over the past five years), the divergence of states’ borrowing and spending behavior compels us to try and unpack this dichotomy, the recent surge in borrowing has not (yet) been accompanied by higher spending,” it said.
Data for 19 states till Feb-25 shows that their total expenditure had shown only 10 per cent growth (vs 20 per cent budgeted), with revex growing at 12 per cent (vs 19 per cent budgeted), whereas capex growth was negative (-4 per cent vs 20 per cent budgeted.
Lower uptake of interest free loan
States have not shown much enthusiasm in meeting the conditions to take more 50 years interest free loan under SASCI. In its submission before the Parliamentary Panel, the Finance Ministry said that a total amount of ₹67,000 crore out of the amount of ₹1,50,000 crore is contingent upon achievement of stipulated reforms and targets fixed for capital expenditure by the states. However, only ₹31,103 crore could be released to the States under these parts till February 14, 2025. This is a major reason for slow pace of expenditure. Considering the trend of releases under SASCI during the financial year 2024-25, revised estimate for 2024-25 has been kept as ₹1.25 lakh crore as against budget estimate of ₹1,50,000 crore, it said.
