India’s state-led infrastructure push is gaining momentum with a projected rise in capital outlay for FY26. A new report by Bank of Baroda highlights how just five states are expected to drive nearly half of the total state capex in the upcoming fiscal year.
According to Bank of Baroda’s latest analysis, the total capital outlay by 26 Indian states is projected to grow from ₹8.7 lakh crore in FY25 to ₹10.2 lakh crore in FY26. This marks a significant expansion in infrastructure spending focused on long-term development assets like roads, hospitals, and schools.
Uttar Pradesh is forecast to lead the capital expenditure with a 16.3% share in FY26, followed by Gujarat with 9.4%. These two states alone will contribute more than one-fourth of the total state capex. Maharashtra (8.3%), Madhya Pradesh (8.1%), and Karnataka (6.7%) complete the list of top five contributors.
Together, these five states are expected to account for around 48.8% of the projected ₹10.2 lakh crore capex pool, nearly half of the total.
In FY25, the leading contributors to capital outlay were Uttar Pradesh (16.9%), Maharashtra (10.9%), Gujarat (8.1%), Madhya Pradesh (7.5%), and Odisha (6.4%). Notably, Odisha is expected to fall out of the top five in FY26, making way for Karnataka’s growing capex share.
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While the top five states are scaling up their capital investments, smaller states like Nagaland, Himachal Pradesh, and Sikkim are estimated to contribute just 0.4% each to the total capex. This reflects the limited fiscal space and smaller project sizes in these regions.
As per the report, total receipts for all 26 states are projected to reach ₹69.4 lakh crore in FY26, up 10.6% from ₹62.7 lakh crore in FY25. Revenue receipts are estimated to grow by 12.3%, while capital receipts may increase by 6.6% year-on-year.
Uttar Pradesh again tops the list with 13.3% of total revenue receipts, followed by Maharashtra with 11.3%. Madhya Pradesh, Karnataka, and Rajasthan are each expected to contribute 5.9% of total revenue collections. Tamil Nadu, which featured among the top revenue earners in FY25, is expected to see its relative share change marginally.
The report also highlights fiscal discipline across states. Around 12 states are projected to record fiscal deficits below their historical median levels, while 13 states are likely to post revenue surpluses in FY26. This suggests a broad-based commitment to responsible spending while pushing infrastructure growth.
Capital outlay plays a crucial role in economic development as it finances asset creation. Roads, irrigation systems, schools, and health infrastructure fall under this category. The rising capital expenditure by states is seen as a strong indicator of government-led economic expansion during a time of global uncertainty.
The FY26 outlook paints a promising picture of India’s infrastructure-led growth strategy. With ₹10.2 lakh crore in projected capital outlay and five states contributing nearly 50% of this amount, regional powerhouses like Uttar Pradesh and Gujarat are set to play a key role in shaping India’s development trajectory.
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Published on: Jun 23, 2025, 3:48 PM IST
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