Uttar Pradesh, Gujarat Lead As Over Five States Account For Half Of India’s Capital Outlay Surge In FY26

India’s capital outlay is set to receive a big boost from just five states in the financial year 2025-26 (FY26), according to a recent report by Bank of Baroda. Leading the pack are Uttar Pradesh and Gujarat, closely followed by Maharashtra, Madhya Pradesh, and Karnataka. Together, these states will contribute nearly half of the total capital expenditure, showing just how crucial they are to India’s infrastructure and development plans. The report estimates that the combined capital outlay of 26 states will rise from Rs 8.7 lakh crore in FY25 to Rs 10.2 lakh crore in FY26.

Capital outlay is the money state governments invest in building or acquiring fixed assets like roads, highways, schools, and hospitals. This expected increase shows how governments are prioritizing the expansion of physical infrastructure to fuel economic growth.

As the report puts it, “Over 5 states are estimated to contribute around 50 per cent of the total capital outlay in FY26, with Uttar Pradesh and Gujarat amongst the biggest contributors, followed by states like Maharashtra and Madhya Pradesh.” This underlines the important role these states play in shaping India’s development story.

State-wise Capital Outlay Contributions For FY26:

• Uttar Pradesh leads with a 16.3% share in capital outlay, remaining the biggest investor in fixed assets.
• Gujarat follows with a 9.4% contribution.
• Maharashtra holds an 8.3% share, down from 10.9% in FY25.
• Madhya Pradesh accounts for 8.1% of the capital outlay.
• Karnataka rounds out the top five with a 6.7% share.
• Smaller states like Nagaland, Himachal Pradesh, and Sikkim contribute the least, with only a 0.4% share in FY26.
• The shift in shares shows Gujarat increasing its capital outlay while Maharashtra’s share has declined compared to FY25.
• The concentration of capital outlay in larger and more industrialized states highlights their expanding role in India’s infrastructure and economic growth.

Revenue Receipts To Increase Alongside Capital Outlay

The Bank of Baroda report also projects a rise in total receipts from all 26 states, estimating an increase from Rs 62.7 lakh crore in FY25 to Rs 69.4 lakh crore in FY26. This 10.6 percent growth includes a projected 12.3 percent rise in revenue receipts and a 6.6 percent increase in capital receipts. Uttar Pradesh is expected to contribute the largest share of revenue receipts at 13.3 percent, with Maharashtra close behind at 11.3 percent.

Other states such as Madhya Pradesh, Karnataka, and Rajasthan will each contribute around 5.9 percent in revenue receipts. Tamil Nadu, noted for its industrial base and tax collections, continues to hold a strong position among the leading revenue contributors. The rise in receipts supports the states’ ability to maintain fiscal discipline while boosting investments.

Here’s What The Report Says About States’ Fiscal Discipline In FY26:

• How many states will keep their fiscal deficit below median levels?
  Around 12 states are expected to maintain a fiscal deficit lower than their median percentage of GSDP.
• What about revenue surplus?
  13 states are projected to run a revenue surplus, showing strong financial management.
• Why does this matter?
  Maintaining fiscal discipline means states can keep investing in infrastructure without risking financial instability.
• What does this combination mean for India’s growth?
  Rising capital outlay paired with controlled deficits reflects a smart, balanced approach to economic development and fiscal health.

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