New Delhi [India], March 30 : The Budgets tabled by the states so far in 2025 indicate that growth in their collective capital outlays is projected to moderate, mimicking the trend seen in the Union budget this year, as per a report by Elara Capital.
Elara Capital said it has analysed the Budget documents presented by 18 states.
The financial services firm projected states' capital outlay to fall 15.9 per cent year-on-year in 2025-26 versus the prior two years' average growth of 23.4 per cent.
However, as a rate of GSDP (gross state domestic product), the capital outlay has been steady at 2.8 per cent, a tad above 2.7 per cent in 2024-25(RE).
"Yet, with only 54.3 per cent of the revised estimates being spent till January this financial year, it seems unlikely that the target for 2024-25(RE) will be achieved," said the Elara Capital report on states' capex.
Among key sectors, water supply, sanitation and irrigation are focus areas for 2025-26, whereas roads are witnessing a sharp moderation in allocation.
"The pivot away from traditional sectors such as roads, both by the Centre and states, to emerging sectors such as water supply, sanitation, digital infrastructure, urban, and Irrigation will aid order inflows for diversified infrastructure companies...over sectoral specialized companies (standalone road EPC plays)," said Elara Capital.
The Union capital expenditure for 2025-26 is expected to grow by 10.08 per cent year-on-year in 2025-26(BE), following a growth of 30 per cent through 2020-21-2023-24.
As per the Elara Capital report, Maharashtra is set to de-grow capital outlay; while Andhra Pradesh targets to raise capital outlay sharply in 2025-26.
Maharashtra, after projecting a massive overspending in 2024-25(RE), has budgeted a de-growth in capital outlay by 11.1 per cent year-on-year in 2025-26(BE), against a 31 per cent year-on-year growth in 2024-25(RE).
Other states that have seen a decline in allocation to capital outlay in 2025-26 are Bihar (-7.2 per cent), Assam (-13.4 per cent), and Himachal Pradesh (-55 per cent). On the other hand, states such as Gujarat, Andhra Pradesh and Uttar Pradesh continue to push ahead with robust capital investment plans.
Andhra Pradesh leads with an impressive 68.8 per cent increase in projections, followed by Gujarat (36.1 per cent) and Uttar Pradesh (11.9 per cent).
Capital expenditure, or capex, is used to set up long-term physical or fixed assets.