States To Get Rs 50,000 To Rs 70,000 Crore Capex Injection From Centre Amid Push For Infrastructure Growth

According to sources, the Union government is expected to release between Rs 50,000 crore and Rs 70,000 crore to states under its 'special assistance for capital investment' scheme during the third quarter of Financial Year (FY)-25 (October-December). 

This funding aims to invigorate state capital expenditure, particularly on infrastructure projects, following slowed spending and growth in the first two quarters due to the general elections.

“The disbursement of these interest-free loans has been delayed by the election period in Q1, FY25, with a substantial release now planned for Q3, FY25,” said one source familiar with the matter, speaking on anonymity.

In FY24, 16 states, including Bihar, Gujarat, Tamil Nadu, and West Bengal, opted for the scheme’s interest-free loans, which have a 50-year tenure.

During her budget speech last July, Finance Minister Nirmala Sitharaman announced an increase in allocations for this scheme to Rs 1.5 trillion for FY25, up from Rs 1.3 trillion in the interim budget.

Around 58 per cent of these funds—approximately Rs 88,000 crore—are linked to outcomes and reforms at the state level, including initiatives in housing, urban planning, digital libraries for young people, and incentives for scrapping outdated government vehicles.

However, the source cautioned that states should use these funds to supplement, rather than replace, their own capital expenditure efforts.

Originally introduced in FY21, the interest-free loan scheme has proven effective in driving state-level capital investment and aiding the economy’s post-pandemic recovery.

Also Read: PM Modi’s Three-Nation Tour From 16-21 November: Nigeria First, Followed By G20 Summit In Brazil, Ending With CARICOM Meet In Guyana