States' capital expenditure seen rising 10-12% to ₹8.5 trillion in FY27

States across India are likely to ramp up capital outlay by 10-12 percent to reach ₹8.5 trillion in FY27, according to ratings agency Crisil. The anticipated spending surge reflects improving financial flexibility at the state level coupled with strengthened central assistance mechanisms.

The State Assistance to States for Capital Investment (SASCI) scheme is expected to play a pivotal role in enabling higher capital expenditure. The scheme has been instrumental in providing states with additional fiscal resources to pursue infrastructure development initiatives aligned with national growth priorities.

Urban infrastructure projects are anticipated to emerge as a key driver of capital spending growth during the second half of FY27. This includes investments in urban transport, water supply systems, waste management, and related municipal services across major metropolitan areas and tier-2 cities.

Improved fiscal headroom at the state level has created conducive conditions for increased capital deployment. Better revenue collections and optimized expenditure management have provided states with greater flexibility to prioritize long-term productive investments over revenue spending, supporting broader economic development objectives.

The projected spending increase reflects states' commitment to infrastructure modernization and urban development, complementing the central government's push for sustained economic growth and improved public service delivery across the country.