According to the latest analysis by the Comptroller and Auditor General (CAG) of India, states utilized 10.67% of their FY27 capital expenditure budget in the first quarter, down from 10.94% in the same period last year. Despite this decline in proportionate terms, absolute spending reached a six-year high of ₹1.11 trillion, exceeding the ₹1.06 trillion spent in Q1FY26. This spending pattern continues the trend observed since FY22, with the first-quarter utilization rate moving within a fairly narrow band, though it remains below the strongest year of Q1FY24 at 13.23%.
According to reports from Business Standard, even prosperous southern states utilized a significant portion of their FY25 debt for operational expenses rather than productive asset creation. This pattern suggests that states are borrowing primarily to maintain existing services and operations rather than investing in infrastructure and development projects that could drive long-term economic growth. The latest CAG data confirms this trend, with states continuing to rely on debt financing when their own revenues fall short of requirements for capital formation activities.
As reported by the CAG analysis, Kerala led capex utilization at 36.41% of its annual allocation in Q1FY27, followed by Madhya Pradesh (18.21%), Andhra Pradesh (16.61%), Haryana (16.26%), and Himachal Pradesh (15.90%). Conversely, Tripura utilized only 1.81% of its allocation, while West Bengal (1.89%) and Meghalaya (3.03%) were among the weakest performers. Among the largest states, Uttar Pradesh (₹1.78 trillion allocation) spent just 6.34% by June end, with Odisha (5.19%), Tamil Nadu (5.53%), and Karnataka (6.83%) also lagging significantly.
According to the CAG data, states collectively spent ₹9.66 trillion (18.52%) of their combined budgeted revenue expenditure of ₹52.14 trillion for FY27 in the first quarter. Himachal Pradesh recorded the highest revenue utilization at 25.01%, followed by Andhra Pradesh (24.66%), Telangana (23.38%), and Kerala (22.69%). In tax revenue, states collected ₹7.73 trillion in Q1FY27, equivalent to 19.11% of their combined budgeted tax revenue of ₹40.48 trillion for FY27. These figures highlight the ongoing challenge of balancing operational needs with capital formation investments across different state categories.
