States urged to increase capex to 3% of GSDP by FY32 for Viksit Bharat goal
Contents4
Livemint - Economy · 19 Sept 2026 · 2 min read
Prelims · Economy Mains · GS3 Economy High relevance
Revenue secretary recommends states raise capital expenditure to 3% of GSDP by 2031-32 to boost infrastructure and productive capacity, critical for India's developed economy target by 2047.
Key points
Capital Outlay: States currently allocate ₹11 trillion (2.4% of GSDP) for capex, below the recommended 3% target for achieving Viksit Bharat by 2047.
Fiscal Capacity: Wide disparities exist among states, with per capita tax revenue ranging from ₹5,000 to ₹38,000 and fiscal deficits between 2.75%-5.5% of GSDP.
Public-Private Partnerships (PPPs): Over 1,800 PPP projects worth ₹25 trillion can leverage private capital for infrastructure, requiring balanced risk-sharing and revenue visibility.
Asset Recycling: Monetizing existing assets like highways and land (as done in Maharashtra) can generate funds for new infrastructure projects.
Credit Flow: State-level credit-to-GSDP ratios vary significantly (₹25,000-₹3 lakh per capita), with agricultural credit ranging 5-15% of GSDP, indicating uneven financial deepening.
[GS3-Economy] The investment rate of 32-34% of GSDP must be channeled efficiently into renewable energy, AI, and circular economy sectors through state-level policy frameworks.
Fiscal Reforms: Strengthening local governments via better financial management and own-revenue mobilization is essential for sustainable development.
Way Forward: States should implement fiscal discipline measures, expand PPP frameworks with clear risk-sharing mechanisms, and adopt asset recycling models to bridge the infrastructure funding gap.
Key terms
- Viksit Bharat
- The government's vision to transform India into a developed economy by 2047, emphasizing infrastructure development, sustainable growth, and improved living standards. For UPSC, it connects to GS3 (Economic Development) and GS2 (Governance) through its focus on federal finance and multi-dimensional growth strategies.
- Gross State Domestic Product (GSDP)
- The total monetary value of all goods and services produced within a state in a financial year. GSDP is critical for UPSC as it determines fiscal federalism, resource allocation, and comparative analysis of state economies under GS3 (Economy) and GS2 (Centre-State Relations).
- Public-Private Partnership (PPP)
- A contractual arrangement between government and private entities to deliver public infrastructure or services, sharing risks and rewards. Relevant for UPSC under GS3 (Infrastructure) and GS2 (Governance) for questions on infrastructure financing and service delivery models.
- Fiscal Capacity
- A state's ability to generate revenue through taxes and other sources to fund public expenditures. This UPSC-relevant concept under GS3 (Fiscal Policy) and GS2 (Federalism) examines inter-state disparities and sustainable development financing.
Practice question
Critically examine the challenges and strategies for states to increase their capital expenditure to 3% of GSDP by 2031-32, as recommended for achieving the Viksit Bharat goal. (250 words, 15 marks)
GS3 15 marks 250 words Mains
Key terms to include: Viksit Bharat Gross State Domestic Product (GSDP) Public-Private Partnership (PPP) Fiscal Capacity Asset Recycling Credit-to-GSDP ratio Fiscal Discipline Own-revenue mobilization
Answer framework
Introduction
Briefly introduce the Viksit Bharat goal and the importance of increasing state capital expenditure (capex) to 3% of GSDP by 2031-32 for infrastructure development and economic growth.
Challenges in Increasing Capex
Fiscal disparities among states with varying per capita tax revenues and fiscal deficits.
Uneven credit flow and financial deepening, especially in agricultural sectors.
Limited own-revenue mobilization by local governments affecting sustainable development.
Strategies to Enhance Capex
Expanding Public-Private Partnerships (PPPs) with balanced risk-sharing and revenue visibility.
Asset recycling models to monetize existing infrastructure like highways and land.
Strengthening fiscal discipline and improving financial management at state and local levels.
Role of Policy Frameworks
Implementing state-level policy frameworks to channel investments into renewable energy, AI, and circular economy sectors.
Enhancing credit-to-GSDP ratios and ensuring equitable financial deepening across states.
Conclusion
Emphasize the need for a multi-pronged approach combining fiscal reforms, PPP expansion, and asset recycling to bridge the infrastructure funding gap and achieve the Viksit Bharat vision.
Fact check
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