Sunday, 11 Oct, 2026
Photo courtesy: Pixabay
States account for a large share of public investment. When capital spending falls short, projects are delayed, demand is lost and future productivity suffers
States have put more money into capital spending in FY27. They are not, however, spending it at the same pace. In April-August, 23 states spent Rs 2.4 lakh crore on capital expenditure, 10.2 per cent more than in the same period of FY26. But their combined capex budgets increased by 13 per cent, to Rs 11.34 lakh crore from Rs 10.04 lakh crore. As a result, only 21.21 per cent of the annual allocation had been used by August, against 21.73 per cent a year earlier.
For an economy counting on public investment to keep growth resilient, that is a warning worth watching. The money is being budgeted; the conversion of that money into roads, power, transport and other productive assets is proving slower.
The pace is not yet alarming by historical standards. FY27’s 21.21 per cent utilisation is the third-highest five-month rate in six years. It is ahead of FY25 (20.90 per cent), FY22 (20.68 per cent) and FY23 (19.98 per cent), although well below the six-year high of 23.89 per cent in FY24.
The state-level divergence, however, is striking.
Kerala has used 53.14 per cent of its Rs 19,717.71 crore capex budget, up from 38.82 per cent a year earlier. Himachal Pradesh is at 46.49 per cent, Assam at 41.06 per cent, Bihar at 40.76 per cent and Andhra Pradesh at 28.17 per cent.
West Bengal is at the bottom, with just 7.07 per cent of its Rs 40,930.29 crore allocation spent by August, down from 11.97 per cent a year earlier.
Uttar Pradesh offers a different kind of warning. It has the largest state capex budget, at Rs 2.16 lakh crore, but had used only 10.05 per cent, or Rs 21,742.07 crore, by August, compared with 12.95 per cent a year earlier. Tripura was at 10.37 per cent.
The deterioration is sharpest in some states that had been moving faster last year. Haryana’s utilisation has fallen to 24.02 per cent from 37.72 per cent; Telangana’s to 26.26 per cent from 39.28 per cent; Nagaland’s to 15.69 per cent from 32.14 per cent; and Jharkhand’s to 14.49 per cent from 23.74 per cent. Meghalaya stood at 14.48 per cent.
Overall, 14 of the 23 states improved their utilisation rate from a year earlier and nine worsened. But 11 states had still spent less than one-fifth of their annual capex allocations by August.
There is an election-year pattern in the numbers. Kerala and Assam, which held Assembly elections in April, were among the strongest spenders. West Bengal, which also went to the polls in April, was the weakest. That may explain some of the divergence, but not the broader slowdown.
The more important problem is the composition of spending. Revenue expenditure is running substantially ahead of capex. The 23 states spent Rs 17.32 lakh crore on revenue expenditure in April-August, or 31.73 per cent of their combined Rs 54.59 lakh crore annual budget. The corresponding capex utilisation was 21.21 per cent.
Himachal Pradesh led revenue spending at 45.47 per cent of its budget, followed by Andhra Pradesh at 42.84 per cent, Telangana at 39.41 per cent and Kerala at 38.29 per cent. Maharashtra was lowest at 25.53 per cent, followed by Bihar at 26.48 per cent and Jharkhand at 27.49 per cent.
Nor is the picture simply one of states running short of tax revenue. They collected Rs 15.08 lakh crore in taxes by August, 36.46 per cent of their combined Rs 41.36 lakh crore annual target.
Gujarat led at 42.3 per cent, followed by Haryana at 41.70 per cent, Assam at 41.11 per cent and Karnataka at 40.02 per cent. Bihar was the weakest, collecting 20.36 per cent of its Rs 2.24 lakh crore target.
The message from the numbers is therefore less about fiscal capacity than execution. States have enlarged their investment plans and are spending more in absolute terms. But allocations are growing faster than actual capital spending.
That is important for the national growth story. State governments account for a large share of public investment, and their infrastructure spending can generate demand today while improving productivity tomorrow. A rupee left unspent is not just a budgetary undershoot; it is an infrastructure project delayed and a potential multiplier lost.
The first five months do not yet point to a collapse in state capex. The utilisation rate remains the third-highest in six years. But the direction deserves attention: bigger capex budgets are not yet producing proportionately faster execution.
For the Centre, the next test is simple. It has pushed states to spend more on capital projects. The states now have to show that they can turn those allocations into assets before the year runs out.
