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A review of these states’ finances by FE showed that their capex in the first four months of FY26 rose to Rs 1.36 lakh crore compared with Rs 1.14 lakh crore in the year-ago period. These states’ capex had contracted by 12% in April-July of FY25, due to election-related pauses.
Borrowings Rise as Revenue Growth Slows
These 17 states — Uttar Pradesh, Maharashtra, West Bengal, Madhya Pradesh, Andhra Pradesh, Tamil Nadu, Gujarat, Haryana, Karnataka, Kerala, Odisha, Punjab, Rajasthan, Chhattisgarh, Jharkhand, Himachal Pradesh and Uttarakhand—also stepped up borrowings in April-July of FY26 as revenue growth was slower on year.
The 17 states under review reported a 6.6% increase in their tax revenues in April-July 2025 at Rs 9.2 lakh crore compared with the 12.5% growth recorded in the year-ago period.
Their borrowings rose 44% on year to Rs 2.19 lakh crore during the period under review in FY26 as against a 26% growth in the year-ago period.
However, these states maintained their revenue expenditure at a comparable level. They reported an 11% increase in revenue expenditure in April-July 2025 at Rs 11.43 lakh crore compared with 11.9% growth seen in the year-ago period.
Centre’s Loan Support Boosts Capex
The Centre has budgeted to extend Rs 1.5 lakh crore in 50-year interest free capex loans to states in FY26 for their capital projects.
The release of interest-free loans to states more than doubled on-year to around Rs 40,000 crore so far in the current financial year. The total sanctions so far stood around Rs 60,000 crore.
The Centre is expected to disburse around Rs 75,000 crore in such loans to states by September to ensure capex is accelerated, sources said.
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Public capex—by centre, states and CPSEs—is key to India’s gross fixed capital formation in recent years in the absence of strong private capex.
Central public sector enterprises (CPSEs) and other agencies, including railways and the National Highways Authority of India (NHAI), have reported an aggregate capex growth of just 2% in the first four months of the current financial year.
The Centre’s capital expenditure surged by 52% in April-June 2025, on a low base as per the latest data.