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Centre Announces Rs 70,000 Crore Capex Boost for States
The Union government plans to release Rs 50,000 to Rs 70,000 crore to states in the third quarter of FY25 under its ‘special assistance for capital investment’ scheme.
This initiative aims to rejuvenate state capital expenditure, particularly on infrastructure projects, following slowdowns in the first half of the financial year due to general elections.
Delayed Disbursement Amid Election Period
Sources revealed that the disbursement of these interest-free loans was delayed during Q1 due to election-related activities. A substantial release is now expected in Q3 (October–December) to compensate for the slowdown.
“In FY25, this disbursement is critical to bolstering state-level investments and driving infrastructure growth,” said a source familiar with the matter.
Key Features of the Interest-Free Loan Scheme
Initially launched in FY21, the scheme has been instrumental in accelerating state-level capital investments, supporting the nation’s post-pandemic recovery. For FY25, Finance Minister Nirmala Sitharaman raised the scheme’s allocation to Rs 1.5 trillion from Rs 1.3 trillion.
- Reform-Linked Funding: Nearly 58% of the funds—amounting to Rs 88,000 crore—are tied to reforms and outcome-driven initiatives. These include urban planning, housing projects, digital libraries, and scrapping outdated government vehicles.
- State-Level Participation: In FY24, 16 states, including Bihar, Gujarat, Tamil Nadu, and West Bengal, availed the scheme’s interest-free loans with a 50-year tenure.
Focus on Infrastructure Growth
States are encouraged to utilize these funds to supplement their existing capital expenditure rather than replace it, ensuring robust infrastructure development. The scheme aims to bridge funding gaps, promote reforms, and invigorate the economy.
This capex injection reflects the government’s commitment to sustaining long-term growth through infrastructure investments and state-level collaboration.
