Capex pours into 3 states, yet efficiency blooms elsewhere: Report

UP, Maharashtra, and Gujarat dominate capital expenditure, while Karnataka and Telangana lead in capital efficiency, highlighting divergence in investment patterns across states

India’s states are upending the capex dominance story as Uttar Pradesh, Maharashtra, and Gujarat claimed 30 per cent of national capital expenditure in 2024-25, while Karnataka and Telangana, with productive-to-invested capital ratios exceeding 100 per cent, are generating more active economic assets than recorded investments suggest, reveals Rubix Data Sciences’ State of the States report.

 

These efficiency frontrunners demonstrate how India’s top economies are mastering the art of extracting greater output from every investment rupee, even as spending remains tightly clustered in just three heavyweights.

 

The Rubix report’s standout insight lies in productive capital-to-invested capital ratios across India’s top 10 GDP-contributing states, which broadly improved from FY2015 to FY2024. Productive capital represents assets actively generating economic activity and income, while invested capital reflects total infrastructure and assets built through past spending.

 

 

According to the report, Karnataka and Telangana led at 103 per cent and 108 per cent, respectively, in FY2024. “This most likely reflects strong private sector investment, deepening of services-led capital, improved capital utilisation, or timing effects in investment reporting,” the report reckoned. Gujarat climbed from 83 per cent to 90 per cent, with its gains tied to comprehensive policies such as the Gujarat Industrial Policy.

 

States such as Uttar Pradesh, Tamil Nadu, West Bengal, and Andhra Pradesh recorded the most significant gains in their ratios, reflecting stronger asset creation and improved capital deployment outcomes, the report stated. Maharashtra’s ratio reportedly remained stable at a high level, indicating “consistent alignment between invested and productive capital within a diversified and mature industrial structure.” By contrast, Rajasthan and Madhya Pradesh showed little change over time, meaning their productive capital grew steadily without major jumps in efficiency or rapid transformation.

 

The report points out that this efficiency trend unfolded even as capital expenditure remained heavily concentrated, with Uttar Pradesh, Maharashtra, and Gujarat accounting for nearly 30 per cent of India’s capex in FY2025. The northern region led capex regionally, driven by large infrastructure projects including Uttar Pradesh’s Purvanchal, Bundelkhand, and Ganga expressways, Jewar (Noida) International Airport, defence and electronics manufacturing corridors, and large industrial land development by UP State Industrial Development Authority (UPSIDA).

 

The top 10 states accounted for approximately 67 per cent of total capex, highlighting persistent investment concentration despite broader efficiency gains. On the capital formation front, new gross fixed capital formation (GFCF) showed gradual geographic rebalancing, with the western region’s share declining from 49 per cent in FY2015 to 34 per cent in FY2024 as the North and South gained ground. Gujarat, Maharashtra, and Tamil Nadu ranked among the top three states in both fixed capital stock and GFCF in FY2024, together accounting for about 40 per cent of each.

 

For lenders and financial institutions, higher capital efficiency across major states supports stronger credit performance, while concentrated capex in infrastructure-heavy states signals sustained demand for project financing.

 

“The findings reveal that most of India’s largest state economies are becoming more efficient at converting investments into productive assets, while some mature states, such as Gujarat and Maharashtra, remain stable but show signs of capital efficiency reaching a plateau,” it concluded.