India's Top States Gear Up for 7-9% Capital Outlay Growth in 2024-25

Crisil Ratings forecasts a 7-9% increase in capital outlay for India's top 18 states, reaching Rs 7.2 lakh crore in 2024-25. Key growth drivers include transport, water supply, and sanitation. The fiscal space is supported by higher GST collections and central tax shares, with interest-free loans bolstering capex.

India's leading states are poised for a significant capital outlay increase of 7-9% in the fiscal year 2024-25, building on the previous year's 27% rise. According to Crisil Ratings, the top 18 states anticipate reaching Rs 7.2 lakh crore in investments.

This growth is primarily driven by sectors such as transport, water supply, and sanitation, including housing and urban development. While irrigation expects only modest growth, these states account for nearly 94% of India's total capital outlay.

The capital outlay as a percentage of Gross State Domestic Product is projected at 2.4%, maintaining last year's levels and exceeding the 2.0-2.3% range seen from 2018 to 2023. Crisil Ratings states that the fiscal room to accommodate these investments is bolstered by higher GST collections and state shares in central taxes, along with enhanced interest-free loans for capital expenditure from the central government.

The Centre has increased the budget for interest-free capex loans to Rs 1.5 lakh crore for the current fiscal, up from Rs 1.3 lakh crore the previous year, with an 80% transfer rate anticipated again. Anuj Sethi, a Senior Director at CRISIL Ratings, predicts achieving around 90% of the budgeted capital outlay target, surpassing the 82-84% average from 2018 to 2023.

(With inputs from agencies.)