The Department of Expenditure has stepped up pressure on state governments to move faster on the utilisation of interest-free loans earmarked for capital expenditure, as the Centre seeks to lift public investment momentum in the current fiscal year. According to officials familiar with the matter, only about one-fourth of the funds allocated under the scheme has been drawn down so far, raising concerns that a significant share of the intended infrastructure push could remain unrealised unless states accelerate project execution.
The Centre had released around ₹51,000 crore by October 1 under the Scheme for Special Assistance to States for Capital Investment, a programme designed to support state-led spending on roads, transport, urban infrastructure, industrial assets and other long-gestation projects. The scheme is one of the government's key fiscal tools for sustaining capital formation at the subnational level, especially at a time when private investment remains uneven across sectors and states continue to face varying degrees of fiscal stress.
Slow Fund Absorption
Officials said the low utilisation rate has prompted the Department of Expenditure to engage directly with state administrations to identify the reasons for delay. In many cases, the issue is not the absence of funding but the pace at which states are able to finalise projects, complete approvals, and begin actual spending. Land acquisition, tendering delays, administrative clearances and coordination across departments are among the recurring constraints that can slow capital outlay even after funds are sanctioned.
The department is now working with states to resolve such bottlenecks and to ensure that projects capable of being executed within the fiscal year are brought forward. The emphasis, officials said, is on converting sanctioned allocations into visible on-ground investment rather than allowing funds to remain idle in state accounts. That is particularly important because the scheme is structured as interest-free borrowing support, making timely deployment crucial for both fiscal efficiency and economic impact.
The urgency also reflects the broader macroeconomic role of public capex in India's growth strategy. Central and state capital expenditure has been used in recent years to support demand, crowd in private investment and strengthen infrastructure capacity. For the automotive and mobility ecosystem, that spending matters directly: roads, logistics corridors, urban transit systems, charging infrastructure and industrial parks all shape vehicle demand, fleet expansion and EV adoption.
Why Timing Matters
The current shortfall in utilisation comes at a sensitive point in the fiscal cycle. Capital expenditure tends to be back-loaded in India, but prolonged delays can compress execution into the final months of the year, reducing the quality of spending and increasing the risk of rushed project implementation. For states, the challenge is to balance procedural discipline with faster delivery; for the Centre, the challenge is to ensure that a scheme intended to catalyse investment does not become underused because of administrative inertia.
The special assistance programme has been a significant instrument for nudging states toward higher capex, particularly those with limited fiscal room to borrow for infrastructure. By linking support to capital investment rather than revenue spending, the Centre has sought to preserve the productive character of the outlay. But the effectiveness of the scheme depends on states' ability to translate borrowing headroom into concrete assets and services.
Officials are also looking at project pipelines more closely to determine where funds can be absorbed quickly without compromising quality. That includes identifying works that are already technically ready, have completed approvals, or can be advanced with minimal additional procedural delay. The objective is to improve utilisation before the fiscal window narrows further.
Pressure On Execution
The latest push underscores a familiar tension in India's public investment system: funding availability is often less of a constraint than execution capacity. While the Centre can create incentives and release resources, the pace of spending ultimately depends on state-level project preparation and implementation. In that sense, the current drive is as much about administrative coordination as it is about fiscal policy.
For the mobility sector, stronger state capex can have second-order effects beyond construction activity. Better roads and urban infrastructure improve vehicle usage patterns, support freight efficiency and make electric mobility more viable by improving connectivity and reducing operational friction. If states succeed in accelerating spending, the benefits could extend across automotive manufacturing, EV charging deployment and allied infrastructure.
For now, the message from the Department of Expenditure is clear: the money has been released, but the clock is ticking. States are being urged to move from allocation to execution quickly, or risk leaving a major share of the year's capital investment support underutilised.