The combined revenue deficit of 18 states stood at Rs. 1.1 trillion during April-December FY2026, nearly 80% of the Rs. 1.3 trillion indicated in the FY2026 Budget Estimates (BE). However, the fiscal deficit of the 18 states stood at Rs. 5.6 trillion in 9M FY2026, equivalent to 53% of the BE. Based on FY2026 BE and the trends in 9M, the combined revenue receipts, revex and capex of the 18 states need to expand by around 54%, 43% and 53%, respectively, in Q4 FY2026, to meet the budgeted target for the fiscal, which seems unlikely. Factoring in a back-ended disbursement of capex loans and the sustained momentum in such spending in Q4 from Q3, ICRA projects a 20–25% YoY rise in state capital spending in Q4FY2026. ICRA estimates the combined capex of 18 states at Rs. 8.5–8.7 trillion for FY2026 (88– 90% of the Rs. 9.6 trillion in BE), translating into a full-year growth of 16–18%.

EXHIBIT: YoY trends in revenue receipts of 18 states

Source: State Budgets; CAG; ICRA Research