Budget 2026: States Advocate for Increased Capex Aid and GST Loss Compensation
Finance Minister Nirmala Sitharaman is set to unveil her ninth consecutive full budget for FY27 on February 1. During recent pre-budget discussions, several states expressed a strong need for enhanced financial support to boost capital investments and compensate for revenue losses stemming from recent Goods and Services Tax (GST) adjustments.
Key Demands from States
– Increased Capital Expenditure (Capex) Aid: States are urging for greater special assistance aimed at capital investments.
– GST Loss Compensation: An emphasis was placed on the need for improved measures to offset the financial impact of recent GST cuts.
– Urban Infrastructure and Rural Development: Additional funding is requested to strengthen urban areas and rural schemes, particularly housing initiatives.
– Disaster Management Support: States are asking for more resources to address disaster preparedness and climate change impacts, seeking a tailored financial package for regions at high risk.
– Focus on Infrastructure Projects: Specific calls for accelerated approvals and funding for significant road and rail infrastructure projects, particularly in Telangana, where there’s a proposal for developing 2.5 million houses under the Pradhan Mantri Awas Yojana.
States’ Unique Proposals
– Telangana: Proposals include the establishment of an Indian Institute of Management and a focus on expedited infrastructure development, including extensive improvements to roads and the Hyderabad Metro Rail system.
– Andhra Pradesh: A dedicated Rayalaseema Horticulture Development Package and assistance for the Polavaram–Nallamala Sagar link are on their wish list.
– Kerala: Finance Minister KN Balagopal highlighted the wish to lift the borrowing ceiling diminished by off-budget borrowing restrictions and addressed substantial revenue declines since the GST’s implementation.
Conclusion and Future Talks
The meeting, attended by various state officials including the Chief Ministers and Deputy Chief Ministers, along with Union ministers and finance ministry representatives, aimed to foster collaboration for a progressive budget. The discussions reflect the states’ collective aim for a balanced financial framework that fortifies both urban infrastructure and rural schemes while addressing the specific needs for GST loss compensation.
As the budget presents an opportunity for meaningful reforms, the focus will remain on ensuring that these demands translate into actionable support in the upcoming financial plan. The engagement with states in the budgeting process underscores the importance of cooperative governance to realize India’s vision of development by 2047.