A report by Careedge Ratings forecasts that states' capital expenditure (capex) growth in India will slow to 8-10% in FY27, a significant drop from 17% in FY26. This moderation is primarily due to tighter fiscal space caused by rising revenue expenditure commitments and a slowdown in revenue growth. The report highlights that geopolitical crises, particularly in West Asia, could further strain capital outlays by affecting energy prices and overall revenue. Revenue growth for states is expected to be modest, with projections of 6.2% in FY26 and 7.9% in FY27, trailing nominal Gross State Domestic Product (GSDP). The revenue deficit is anticipated to widen from 0.8% of GSDP in FY25 to 1.2% by FY27, emphasizing the need for states to maintain fiscal discipline while meeting welfare commitments. Notably, states like Uttar Pradesh, Madhya Pradesh, Gujarat, Maharashtra, and Telangana continue to prioritize capital expenditure despite these challenges, reflecting a commitment to infrastructure development.