UP And Gujarat Push State Capex To Rs 10 Tn In FY26: Bank Of Baroda

New Delhi, Jun 23 (KNN) Capital expenditure by 26 Indian states is projected to rise significantly to Rs 10.2 trillion in FY26, up from Rs 8.7 trillion in FY25, according to a recent study by Bank of Baroda.

The increase reflects a growing emphasis on infrastructure-led development at the sub-national level, with five states expected to contribute nearly half of the total outlay.

Uttar Pradesh is set to lead with a 16.3 per cent share of the total capex, followed by Gujarat (9.4 per cent), Maharashtra (8.3 per cent), Madhya Pradesh (8.1 per cent), and Karnataka (6.7 per cent).

These five states are anticipated to remain at the forefront of capital investment in FY26. In comparison, FY25's top contributors included Uttar Pradesh (16.9 per cent), Maharashtra (10.9 per cent), Gujarat (8.1 per cent), Madhya Pradesh (7.5 per cent), and Odisha (6.4 per cent).

At the lower end of the spectrum, Nagaland, Himachal Pradesh, and Sikkim together are expected to account for just 0.4 per cent of total capital expenditure in FY26.

Total receipts across the 26 states are forecast to rise to Rs 69.4 trillion in FY26, marking a 10.6 per cent year-on-year increase. Revenue receipts are expected to grow by 12.3 per cent, while capital receipts may increase by 6.6 per cent.

Uttar Pradesh is projected to maintain its lead in revenue generation with a 13.3 per cent share, followed by Maharashtra at 11.3 per cent.

Madhya Pradesh, Karnataka, and Rajasthan are each expected to contribute 5.9 per cent. Tamil Nadu, which featured among the top revenue earners in FY25, is not in the top five for FY26.

The fiscal outlook appears stable, with most states expected to remain within their fiscal deficit limits.

Twelve states are projected to post a fiscal deficit-to-GSDP ratio below their median levels, while 13 states are likely to report a revenue surplus in FY26.

States are expected to continue relying heavily on internal taxes to finance their expenditure, with the Goods and Services Tax (GST) retaining its position as the largest contributor to own tax revenue.

Internal taxes—including GST, sales tax, excise, and stamp duties—are projected to account for 89 per cent of states’ own tax revenues, consistent with trends seen in FY25.

GST alone is forecast to constitute 44.2 per cent of own tax revenue in FY26, up from 43.8 per cent in the previous year, reflecting a strong 15.6 per cent annual growth.

States most reliant on GST include Nagaland (67.3 per cent), Delhi (59.7 per cent), and Bihar (57.1 per cent), while others like Madhya Pradesh (38.6 per cent), Andhra Pradesh (37.4 per cent), and Arunachal Pradesh (19.7 per cent) are significantly below the national average.

Sales tax is expected to contribute 19.5 per cent of own tax revenues in FY26, slightly down from 20.1 per cent in FY25. Kerala (36.7 per cent), Tamil Nadu (31.8 per cent), and Meghalaya (27.9 per cent) will remain among the most dependent on this revenue stream.

State excise, largely levied on liquor and tobacco, is forecast to contribute 13.9 per cent, marginally down from 14.2 per cent in FY25.

Sikkim (27.3 per cent), Andhra Pradesh (24.9 per cent), and Uttar Pradesh (21.4 per cent) are expected to lead in this category.

Stamp duty collections are projected to decline to 11.7 per cent of own tax revenue in FY26, from 14.2 per cent in FY25. Despite this drop, Haryana is expected to maintain the highest share at 18 per cent.

Maharashtra, Bihar, and Karnataka are also set to post strong performances, with each contributing around 14.5 per cent.

The study underscores the increasing role of GST in state fiscal strategies and highlights the growing momentum of capital spending as a key driver of state-level economic growth.

(KNN Bureau)