State governments started 2026-27 on a cautious note, with an estimated 8% dip in their budgetary capital expenditure and moderate growth in revenue expenditure.
Data compiled from 20 major states showed that aggregate capital expenditure fell 8.2% year-on-year to Rs 20,931 crore in April 2026, reversing the 15.9% growth recorded in the corresponding month of the previous year. The decline suggests that states may be prioritising fiscal prudence and preserving financial flexibility amid heightened global uncertainty and concerns over the impact of geopolitical tensions on growth, inflation and public finances.
Revenue expenditure, largely spending on salaries, pensions, subsidies and welfare programmes rose 5.5% in April, although the pace was slower than the 8.9% growth recorded a year earlier. The moderation indicates that while states continued to support routine expenditure commitments, they refrained from a significant spending expansion at the start of the fiscal year.
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Tax Revenues Surge 20%
However, aggregate tax revenues of the 20 states increased 20.3% year-on-year to Rs 2.58 lakh crore in April, compared with a marginal decline in the same month last year. Stronger tax receipts provided some cushion to state finances despite the softer expenditure profile.
Borrowings and liabilities, meanwhile, contracted sharply by 36.2% year-on-year after surging more than 66% in April 2025. Total borrowings declined to about Rs 55,500 crore, suggesting that states relied less on market borrowing as revenue collections improved and expenditure growth remained contained.
Divergent Regional Spending
The state-wise picture was mixed. Uttar Pradesh, Maharashtra, Karnataka, Tamil Nadu and Gujarat remained among the largest contributors to tax revenues. On the expenditure front, several states, including Kerala and Rajasthan, recorded healthy capital spending, while others reported a contraction, pulling down the aggregate figure.
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Amid global uncertainties, the Centre stepped up both capital and revenue expenditure in April, leading to an almost doubling of the fiscal deficit to 21.4% of the annual target, according to official data.
The Centre is nudging state-run enterprises and states to step up capex to support economic activity amid global uncertainties. The Centre has budgeted to provide Rs 2 lakh crore in capex support to states in FY27.
TOPICScapital expenditureThis article was first uploaded on June seven, twenty twenty-six, at twenty-three minutes past seven in the evening. © The Indian Express (P) Ltd