In the first ten months of the current fiscal year, state government spending on asset creation may have increased by more than a third year over the same period last year, up from a 7% increase. According to FE's analysis of the budgets of eighteen major states, capital expenditures increased by a significant 37% from April to January of current fiscal year.

This bodes favorably for public capital expenditures in general and the economy at large. It demonstrates that states have not only swiftly reversed the decline in capital spending that was shown in FY21, but have also solidified the trend.

The development supports the idea that the states' revenue and purchasing power have not been significantly impacted by the removal of GST compensation.The Center's rapid tax transfers and interest-free loan releases were also beneficial.

States' tax collections have remained rather robust, but several have also increased their borrowing levels in order to increase capital expenditures. The 18 largest states—Andhra Pradesh, Kerala, Maharashtra, Odisha, Punjab, Rajasthan, Assam, Uttarakhand, Telangana, Jharkhand, West Bengal, Andhra Pradesh, Haryana, Karnataka, Kerala, Maharashtra, and Odisha—reported capital investments totaling Rs 4.3 trillion between April and January 2024, up from Rs 3.1 trillion in the same period the previous year. The Center gave these states long-term loans totaling about Rs 65,745 crore in April–January of this year in order to help them create assets.

Uttar Pradesh (UP) was the largest investor from April to January, contributing Rs 78,180 crore, up from Rs 54,608 crore during the same period last year. Following Uttar Pradesh were Madhya Pradesh (Rs 41,867 crore compared to Rs 29,888 crore in the same time last year) and Maharashtra (Rs 36,047 crore compared to Rs 28,106 crore).

A significant rise in capital investment following the Covid 19 period has been continued and consolidation has been fostered, in addition to the Central government's assistance for capital expenditures. In comparison to 5.75 trillion in FY22, 4.57 trillion in FY21, and 4.6 trillion in FY20, the total capital expenditure (CapEx) of all states was Rs 6.82 trillion in FY23.

The tax collections of the 18 states that are the subject of this analysis increased by 13% to Rs 20.7 trillion between April and January of 2024, compared to a 22% increase during the same time the previous year. During the April-January fiscal year of FY24, these states borrowed Rs 6 trillion, up 39% year over year from the 12% decrease in the same time the previous year.