The Department of Expenditure has asked states to move faster on the use of interest-free loans meant for capital investment, as the Centre steps up pressure to ensure the money translates into actual infrastructure spending. The appeal comes at a time when only around one-fourth of the funds allocated under the scheme have been utilised, raising concerns that delays at the state level could blunt the impact of a key fiscal support measure designed to lift public investment.
By October 1, the central government had released about ₹51,000 crore under the Scheme for Special Assistance to States for Capital Investment, according to officials familiar with the matter. The programme is intended to help states finance infrastructure and other capital works without adding to their interest burden, making it one of the Centre's most important tools for pushing up aggregate public capex. But the low pace of utilisation suggests that administrative bottlenecks, project readiness issues and procurement delays may be slowing the flow of money into the economy.
Utilisation Gap Widens
The concern is not merely accounting. Capital expenditure has a stronger multiplier effect than routine spending because it tends to create assets, generate demand for materials and support employment across construction, logistics and manufacturing-linked sectors. For the automotive and mobility ecosystem, faster state capex can matter indirectly but significantly: better roads, urban transport systems, charging corridors, industrial parks and logistics networks all depend on timely public investment. Delays in spending can therefore weaken the broader demand environment for vehicles, EV infrastructure and mobility services.
Officials said the Department of Expenditure is actively engaging with states to identify projects that can be taken up quickly and to resolve procedural delays. The focus is on ensuring that sanctioned funds do not remain idle while the fiscal year advances. In practice, states often face challenges in converting budgetary allocations into executable projects, especially when land acquisition, tendering, clearances or contractor mobilisation take longer than expected.
The Centre's push also reflects a wider policy objective: sustaining capital formation at a time when private investment remains uneven and the economy continues to rely on public spending to support growth. The special assistance scheme was designed to give states a low-cost financing window for capex, but the effectiveness of the programme depends on execution at the ground level. If utilisation remains sluggish, the intended boost to infrastructure and economic activity could be delayed into later quarters, reducing the scheme's near-term macroeconomic impact.
Centre Seeks Faster Execution
The Department of Expenditure's intervention signals that the Centre is not content with sanctioning funds alone; it wants visible progress in project implementation. Officials are understood to be working with states to remove hurdles and match available financing with projects that are ready to move. That could include roads, bridges, urban infrastructure, water systems, power-related assets and other public works that can absorb capital quickly.
For states, the message is clear: the window for using interest-free capex loans is open, but it will not remain effective unless projects are identified and executed swiftly. The scheme's design gives states fiscal room, but it also places responsibility on them to maintain project pipelines and administrative readiness. In a year when public capital spending is being closely watched as a growth driver, underutilisation could become a missed opportunity.
The latest push underscores how central and state fiscal coordination is becoming increasingly important to India's growth strategy. With the Centre already having released a substantial sum, the next test is whether states can convert approvals into on-the-ground spending quickly enough to meet targets and support the broader investment cycle. For sectors dependent on infrastructure build-out, including automotive and electric mobility, the pace of that conversion will matter well beyond the balance sheets of state governments.