Subnational capital spending is on track to reach approximately Rs 8.5 lakh crore in FY27, backed by a 33 per cent increase in 50-year interest-free loans through the central SASCI scheme. Urban development, sanitation, housing, and water supply will spearhead the expansion with double-digit growth, while transport remains the largest segment at roughly one-fourth of total outlays. Momentum will build primarily during the second half of the year as tied central funds clear procedural hurdles. However, meeting these targets could be challenged by elevated borrowing costs, softer revenue streams, and expanded welfare commitments.
Key points
Expanded funding via the 50-year interest-free SASCI scheme provides essential support ou…: Expanded funding via the 50-year interest-free SASCI scheme provides essential support outside standard borrowing limits.
The shift in sectoral priorities will deliver double-digit growth to urban infrastructure…: The shift in sectoral priorities will deliver double-digit growth to urban infrastructure while irrigation spending moderates to low single digits.
Capital expenditure targets face downside risks from elevated borrowing costs, weaker rev…: Capital expenditure targets face downside risks from elevated borrowing costs, weaker revenue growth, and competing welfare expenditures.
Sources checked by our analysis pipeline: 1
Mumbai: States' capital expenditure is expected to increase 10-12 per cent to about Rs 8.5 lakh crore in FY27, driven by higher central assistance and improved fiscal flexibility, a report said on Friday.
The report estimates that they will achieve around 84 per cent of their aggregate budgeted capital outlay, compared with 82 per cent in the previous fiscal year.
Capital outlay growth is expected to surpass the 8.6 per cent recorded last fiscal year, supported by a 33 per cent increase in allocation under the Special Assistance to States for Capital Investment (SASCI) scheme to Rs 2 lakh crore.
The scheme, introduced in FY21, provides states with 50-year interest-free loans over and above their normal borrowing limits.
"Higher SASCI support gives states additional room to invest without drawing on their normal borrowing limits. The scheme has demonstrated strong utilisation, which should help translate this funding into capital spending," said Anuj Sethi, Senior Director at Crisil Ratings.
Revenue receipts are expected to grow around 0.75 per cent faster than revenue expenditure, supported by GST collections and tax devolution from the…
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