New Delhi [India]: The latest state Budgets for 2025 indicate a moderation in capital outlay growth, reflecting a similar trend seen in the Union Budget 2025. A report by Elara Capital highlights a 15.9% year-on-year decline in capital expenditure (capex) for 2025-26, compared to the 23.4% average growth in the previous two years.
However, capital outlay as a percentage of GSDP has remained stable at 2.8%, slightly higher than the 2.7% recorded in 2024-25(RE). Despite this, actual spending trends suggest that many states may struggle to meet their 2024-25 targets, with only 54.3% of revised estimates spent until January 2025.
Sectoral Priorities: Water & Digital Infra Take Lead
🔹 A significant shift in state investment priorities is evident:
✔ Higher allocations for water supply, sanitation, digital infrastructure, urban development, and irrigation.
❌ Sharp moderation in capital outlay for road infrastructure, continuing a trend seen at the national level.
“The pivot away from traditional sectors such as roads to emerging areas like water supply, sanitation, digital infrastructure, and irrigation will favor diversified infrastructure companies over standalone road EPC firms,” said the Elara Capital report.
State-wise Trends: Maharashtra & Bihar Cut Capex, AP & Gujarat Lead Investment Surge
📉 States cutting capital outlay for 2025-26:
- Maharashtra: -11.1% YoY (after a 31% increase in 2024-25)
- Bihar: -7.2% YoY
- Assam: -13.4% YoY
- Himachal Pradesh: -55% YoY
📈 States ramping up capital investment:
- Andhra Pradesh: +68.8% YoY
- Gujarat: +36.1% YoY
- Uttar Pradesh: +11.9% YoY
Union Budget Capex Growth Slows to 10%
The Union Government’s capital expenditure for 2025-26 is projected to grow by 10.08%, a significant drop from the 30% growth recorded between 2020-21 and 2023-24.
Conclusion: A Shift in Investment Priorities
With state budgets shifting focus from roads to water, sanitation, and digital infrastructure, the investment landscape for infrastructure companies is evolving. States like Andhra Pradesh, Gujarat, and Uttar Pradesh are driving aggressive capex expansion, while Maharashtra, Bihar, and Assam are scaling back.