Examining India’s State Capex Performance in 2023-24

Posted by Written by Archana Rao Reading Time: 5 minutes

India’s latest capital expenditure (capex) estimates from March indicate that the states of Telangana, Haryana, Andhra Pradesh, Bihar, Jharkhand, and Madhya Pradesh are on track to achieve their budgeted targets. Tracking capex performance has value as such expenditure has multiplier effects in terms of asset creation, raising productivity, and generating jobs.

The Bank of Baroda (BoB) released a report earlier this month tracking the performance of different states in terms of their utilization rate (capital expenditure as a percentage of budget estimates). The report made a comparison of the 27 Indian states in terms of capital utilization in comparison to the same period of the previous year.

India’s lead focus is to boost private investment through aggressive capital spending targets. The federal government has reportedly spent INR 72000 billion (US$86.85 billion) on capex in FY24 (April 2023-January 2024), covering 75.9 percent of the total capital allocated.

Looking at the regional capex performance, the states of Telangana, Madhya Pradesh, Bihar, Kerala, and Haryana used more than 70 percent of their Budget Estimate (BE). Similarly, Andhra Pradesh, Himachal Pradesh, Tamil Nadu, Odisha, Jharkhand, Rajasthan, and Uttar Pradesh used around 50 percent of their BE.

Capex spending in Maharashtra and Gujarat was significantly lower, at 37.5 percent and 46.4 percent of their BE, respectively. Even in West Bengal, Punjab, and Chhattisgarh, the capex target came down to 44.7 percent, 32.8 percent, and 32.7 percent, respectively.

Indian States Capex Budget Estimate in FY 24 (until January) and FY23


Budget estimates FY24 (INR billion)

Budget estimates, FY23 (INR billion)




Madhya Pradesh












Andhra Pradesh



Himachal Pradesh



Tamil Nadu












Uttar Pradesh






West Bengal


















Data Source: BOB report, CareEdge Rating

According to a report published in August 2023, capital expenditure in the southern state of  Tamil Nadu rose to INR 51.9 billion (US$62.57 million) during the first quarter of 2023-2024.

India state capex share

The data was based on the Comptroller and Auditor-General’s (CAG) unaudited provisional figures. Approximately 75 percent of Tamil Nadu’s capex in the first quarter of FY2023-24 were allocated to the economic sector, which includes building roads and bridges and transportation, while 21.3 percent were allocated to the social sector, which includes health and education.

Special assistance scheme

India’s federal government has put restrictions on payments under the “Special Assistance to States for Capital Investment” program in an effort to persuade states to maintain their portion of capital expenditure. Through this program, India hopes to lend its state governments interest-free capital for capex over a 50-year period.

The Special Assistance to States for Capital Expenditure scheme was introduced in FY2020-21. With an allocation of INR 13000 billion (US$15,684 billion), the scheme has been expanded as the “Scheme for Special Assistance to States for Capital Investment 2023-24.”

Part-I of the scheme includes INR 1000 billion (US$12,051 billion), which has been distributed to states based on their share of central taxes as decided by the 15th Finance Commission. Additionally, incentive amounts of INR 300 billion (US$3.61 billion) have been set aside for reform-focused and sector-specific areas, such as the retirement of outdated vehicles, reforms in urban planning, financing of reforms in urban local bodies to make them creditworthy for municipal bonds, housing for police personnel above or in conjunction with police stations, unity malls, libraries for children and adolescents, and digital infrastructure.

Factors influencing India’s states’ capex spending

India’s investment story appears to be anchored by the public sector, with national and state government capex expanding by double digits. Private sector investment has increased slowly, in single digits, and is concentrated in a few areas. Based on the overview of the investment trends, it seems that private investment is narrowly focused on infrastructure and some sectors, such as hospitality and retail, and is yet to surge into other segments.

According to experts, the Indian states with the highest capex were either bound for elections or are poll bound this year. For example, Telangana has met 90 percent of its FY24 capex target. The state held elections to its legislative assembly in November last year.

state capex target y-o-y comparison

Similarly, as of FY24 (until January), the state of Madhya Pradesh, which held assembly elections in November 2023, had spent 77.5 percent of its capex budget. Poll-bound Andhra Pradesh is the other top performer in terms of capital expenditure, having reached 67.4 percent of its goal.

The majority of states, based on the BoB study analysis, are in the negative quadrant since their fiscal deficit and capital spending have both exceeded their BE.

Why should we pay attention to capex spending by states?

Government spending on the development of buildings, machinery, equipment, healthcare facilities, educational institutions, etc. is referred to as capital expenditure. It also covers the costs incurred by the government to purchase fixed assets like land and investments that will yield earnings or dividends in the future. Capex involves funds spent on the following:

  1. Purchasing fixed and intangible assets
  2. Upgrade an existing asset
  3. Repairing an existing asset
  4. Repayment of loans

Focus on capital spending by states is important as it showcases public investment planning and development-linked expenditure, which may encourage labor engagement, expand the economy, build up or upgrade infrastructure, and improve the ability to generate more revenue through asset creation. States with healthy capex report cards often host a positive investment environment for the private sector.

capex target achieved by states

Ultimately, investment is crucial for driving economic growth. Capex has a greater impact on long-term growth and productivity than revenue expenditure due to its ability to create a multiplier effect. Allocating capital for new projects, expanding ventures, or improving technology and infrastructure promotes economic growth by increasing productivity, demand for related industries, and creating job opportunities.

In India, capex loans are distributed to the states in two major categories: one is meant to be unrestricted, and the other is subject to social reforms and specific development expenditures. A key takeaway when comparing the current utilization rate to the same period in the previous fiscal year is the improvement shown by each state – Andhra Pradesh, Haryana, and Jharkhand showing the biggest improvements. Chhattisgarh, Gujarat, and Karnataka are among states that have fallen short of their targets when compared to the same period the previous fiscal. 

(US$1=INR 82.91)

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