Budget 2024: Capital Assistance To States Retained At Rs 1.3 Lakh Crore In FY25

The Union government has retained the same outlay of the Special Assistance To States For Capital Investment scheme at Rs 1.30 lakh crore in FY25, despite the 11% increase in capex outlay.

Capex outlay for the fiscal is set at Rs 11.11 lakh crore.

"The scheme of 50-year interest-free loan for capital expenditure to states will be continued this year with a total outlay of Rs 1.3 lakh crore," Finance Minister Nirmala Sitharaman said in her interim budget speech on Thursday.

The outlay comes amid concerns regarding the complete utilisation of the scheme by states. In FY23, only Rs 76,000 crore of the Rs 1 lakh crore outlined was picked up by states.

Speaking at the post-budget press conference in 2023, India's Finance Secretary expressed optimism on states picking up the capital assistance outlay as they would be "better prepared" in fiscal 2024. However, it remains to be seen how much of the outlay will be claimed under the various heads in Q4 of FY24.

The scheme serves as a 50-year loan to states to be spent on capital expenditure within the particular fiscal. It was first announced post-pandemic in a bid to bolster capital investment at the state level. The outlay of the scheme was significantly raised to Rs 1 lakh crore in FY23 from FY22’s Rs 15,000 crore. Subsequently, it was hiked further to Rs 1.3 lakh crore in budget 2023.

In FY24, the Rs 1.3 lakh crore was divided into two parts. The untied portion of Rs 1 lakh crore will be at the discretion of states, but a part will be conditional on states increasing their actual capex. The balance of Rs 30,000 crore was linked to specific purposes.

According to a monthly report by the Department of Expenditure, under the scheme, Rs 1,01,046 crore have been approved to various state governments and an amount of Rs 61,499 crore has been released to states under various tied and untied portions of the scheme.