UP, Gujarat, Maharashtra to lead ₹10.2 trn state capex push in FY26: Report

A Bank of Baroda study finds over five states will account for nearly 50% of ₹10.2 trillion in state capital outlay for FY26, with GST remaining the largest tax revenue contributor

The capital expenditure by 26 Indian states will increase to ₹10.2 trillion in FY26 from ₹8.7 trillion in FY25, a Bank of Baroda study projects. Just over five states are expected to contribute nearly 50 per cent of this outlay, with Uttar Pradesh alone accounting for 16.3 per cent.

 

Gujarat follows with a projected 9.4 per cent share, ahead of Maharashtra (8.3 per cent), Madhya Pradesh (8.1 per cent) and Karnataka (6.7 per cent). These five states are likely to dominate infrastructure investment in the coming year.

 

In FY25, the top five contributors were 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 bottom end, Nagaland, Himachal Pradesh and Sikkim together are expected to make up only 0.4 per cent of FY26 capital spending.   

 

 

Receipts projected to grow over 10%

 

Aggregate receipts across the 26 states are forecast at ₹69.4 trillion in FY26, marking a 10.6 per cent increase. Revenue receipts are seen growing by 12.3 per cent, while capital receipts may rise by 6.6 per cent.

 

Uttar Pradesh is again expected to lead with a 13.3 per cent share of total revenue, followed by Maharashtra (11.3 per cent), and Madhya Pradesh, Karnataka, and Rajasthan at 5.9 per cent each. Tamil Nadu, a major contributor in FY25, is not among the top five this time.

 

Most states are projected to stay within their fiscal-deficit limits in FY26. Twelve states may post a deficit-to-GSDP ratio below their median levels, while 13 are expected to report a revenue surplus.

 

GST to remain top source of tax revenue

 

The study notes that states will continue to rely heavily on internal taxes, with GST accounting for the largest share of own tax revenue in FY26. Internal taxes, including state GST, sales tax, excise and stamp duties, are projected to form 89 per cent of own tax revenue, consistent with FY25 trends.   

 

GST alone is forecast to make up 44.2 per cent of this, up from 43.8 per cent in FY25, reflecting a 15.6 per cent year-on-year increase. Nagaland (67.3 per cent), Delhi (59.7 per cent) and Bihar (57.1 per cent) are the most dependent on GST, while states like Madhya Pradesh (38.6 per cent), Andhra Pradesh (37.4 per cent) and Arunachal Pradesh (19.7 per cent) fall well below the average.

 

Sales tax and excise see modest declines

 

Sales tax is expected to contribute 19.5 per cent to own tax revenue 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 be among the most reliant on it.

 

State excise, mostly levied on liquor and tobacco, is projected to account for 13.9 per cent of own tax revenue, down from 14.2 per cent. Sikkim (27.3 per cent), Andhra Pradesh (24.9 per cent), and Uttar Pradesh (21.4 per cent) are the top three states in this category.   

 

Stamp duty dips; Haryana maintains top share

 

Stamp duties are projected to fall to 11.7 per cent of own tax revenue in FY26 from 14.2 per cent in FY25, with Haryana continuing to lead at 18 per cent. Maharashtra, Bihar and Karnataka are also expected to record strong collections, each averaging around 14.5 per cent.

 

The findings highlight the growing importance of GST in state finances and the expanding role of capital expenditure in driving state-level growth.