Seven major states increased capital spending by 23.4% to Rs 1.51 lakh crore during April-September of FY27. This growth in infrastructure investment got support from a 17% rise in tax collections. While most states boosted spending, Jharkhand saw a fall. Overall, states kept revenue spending growth low to prioritise development.
Capex by seven major states reviewed by FE rose 23.4% year-on-year to Rs 1.51 lakh crore in April-September of FY27, building on 47.7% growth in the same period last year, indicating a continued emphasis on infrastructure creation.
The increase was supported by a 17% rise in tax revenue collections, which reached Rs 7.41 lakh crore during April-September, compared with 9.4% growth in H1FY26, according to the Comptroller and Auditor General of India data.
Assam and Andhra Pradesh led the capital spending push, with their investment rising 51.7% and 40.4%, respectively, to Rs 15,437 crore and Rs 16,447 crore.
Karnataka also recorded a strong 30% increase to Rs 21,297 crore, while Telangana's capex rose 24.9% to Rs 27,743 crore. Maharashtra, the largest spender among the seven states, increased capital expenditure by 19.1% to Rs 31,405 crore.
However, Jharkhand contracted, with capital expenditure down 33.2% to Rs 4,339 crore, from Rs 6,500 crore a year ago.
The improvement in capex was accompanied by a relatively moderate 5.9% increase in revenue expenditure to Rs 7.87 lakh crore, compared with 8% growth in H1FY26. This suggests that these states have managed to prioritise capital investment while keeping the growth in revenue spending contained.
On the revenue front, Gujarat recorded the strongest tax collection growth at 22.8%, followed by Jharkhand (19.1%) and Karnataka (18.9%). Maharashtra continued to dominate in absolute terms, with tax revenue rising 14.1% to Rs 2.44 lakh crore.
Interestingly, the seven states' borrowings and other liabilities declined nearly 32% to Rs 1.1 lakh crore from Rs 1.62 lakh crore a year earlier. The decline was particularly sharp in Karnataka, where the figure turned negative at Rs 6,119 crore, and Jharkhand, at Rs 2,327 crore.
The states analysed are: Maharashtra, Karnataka, Telangana, Andhra Pradesh, Assam, Gujarat and Jharkhand.
The Centre has released two additional instalments of tax devolution to states in 2026-27, aimed at boosting capital expenditure and supporting development and welfare spending ahead of the festive season.
After lagging in the first 4-5 months, the Centre's release of capex loans to states is expected to improve in the coming months, further aiding the states' capex. The Centre has budgeted Rs 2 lakh crore interest-free 50-year capex loans to states for FY27.