Uttar Pradesh Tops National Capital Spending in FY26
Uttar Pradesh has emerged as India’s frontrunner in infrastructure and development expenditure for the second consecutive fiscal year, with a projected share of 16.3 percent in the country’s total capital outlay for FY 2025-26. The surge reflects a robust momentum in state-led industrialisation and infrastructure push under the current administration.
According to projections based on an analytical report by a leading public sector bank, the cumulative capital expenditure by 26 Indian states is expected to touch ₹10.2 lakh crore in FY26, a significant leap from ₹8.7 lakh crore in FY25. Uttar Pradesh’s share leads this expansion, outpacing traditionally dominant states such as Maharashtra, Gujarat, and Karnataka, and reaffirming its strategic transformation into an investment powerhouse. This sharp rise in outlay is driven by an ambitious portfolio of infrastructure megaprojects in sectors ranging from transportation to defence manufacturing. The Ganga Expressway, the upcoming International Film City, multiple medical colleges, and the Uttar Pradesh Defence Industrial Corridor have positioned the state as a critical node in India’s broader economic corridor.
The state’s sustained dominance in capital spending reflects a policy shift towards future-oriented investments—roads, expressways, logistics hubs, and renewable energy facilities—that are expected to catalyse long-term economic growth while aligning with sustainability goals. In FY25, Uttar Pradesh had already topped the capital expenditure chart with a 16.9 percent share of total state expenditure, far ahead of Maharashtra’s 10.9 percent. This consistent performance signifies not only strong fiscal commitment but a renewed administrative agility in turning policy into action.
The figures represent more than just numbers—they illustrate a critical inflection point in India’s sub-national development landscape. The story of Uttar Pradesh’s capital expenditure is, at its heart, a narrative of decentralised economic leadership. While Delhi has long been the centre of political authority, India’s growth story is increasingly being written in the states. Uttar Pradesh’s ability to command the lion’s share of capex underlines this tectonic shift. Crucially, the state’s investment pipeline is deeply integrated with national goals of green growth, inclusive employment, and ease of doing business. The improved law and order situation, business-friendly reforms, and digital governance tools have significantly improved investor confidence—especially after the 2023 Global Investors Summit, which attracted large domestic and foreign pledges now translating into active projects.
The Bank of Baroda report indicates that Uttar Pradesh is also expected to lead in receipts, with a 13.3 percent share of the total ₹69.4 trillion estimated state revenues in FY26. This reflects robust financial planning and healthy revenue mobilisation. Unlike many states still struggling with fiscal discipline, Uttar Pradesh has effectively widened its tax base without compromising on social sector funding. Within the own-tax revenue structure of Indian states, the GST continues to dominate with an average share of 44.2 percent. Interestingly, while smaller states like Nagaland and Delhi exhibit the highest GST dependency, Uttar Pradesh shows a more balanced portfolio—combining GST inflows with high excise collections, particularly from alcohol and tobacco. Its excise revenue stands at 21.4 percent of total state taxes, placing it third nationally in this metric.
Furthermore, the coordinated approach between the Union and state governments—particularly in fast-tracking project approvals and ensuring timely disbursal of funds—has played a pivotal role in maintaining this upward trajectory. Policy synergy has meant that projects in health, education, and urban development are receiving consistent capital inflows, even as private investment begins to coalesce around these centres. Infrastructure remains a key driver for climate resilience and equity in Indian urbanism. Uttar Pradesh’s infrastructure investments, when mapped against the goals of gender-neutral planning, low-carbon cities, and decentralised employment, reveal significant potential to shape sustainable urban futures. Several medical and educational infrastructure investments are located in Tier-2 and Tier-3 cities, reflecting a departure from metro-centric planning.
For a state that was once marred by chronic underdevelopment, the transformation into a capital-intensive growth engine marks a broader shift in India’s federal development dynamics. However, the state must now ensure that capital investment translates into tangible and equitable outcomes. Transparent governance, citizen engagement, and inclusive project design remain critical to realising the long-term dividends of this historic investment wave. As India prepares for a new era of urbanisation and green industrial growth, Uttar Pradesh’s capex leadership may offer a replicable model for other large states navigating the balance between economic ambition and sustainability.
Whether this momentum is sustainable over the next decade will depend on systemic reforms—especially in project execution, environmental planning, and citizen-first service delivery. But for now, Uttar Pradesh stands as a symbol of a new India—an India where infrastructure is not just about concrete and steel, but also about possibility, inclusion, and foresight.
