The allocation under the Special Assistance to States for Capital Investment (SASCI) scheme may be raised to Rs 1.8-2 lakh crore for 2026-27 from Rs 1.5 lakh crore budgeted for the current fiscal.
“The multiplier effect of capital spending in states is often higher than that by central government entities. This essentially means capex spending by states yields higher economic dividends,” he said, explaining the rationale behind the latest proposal. Finance minister Nirmala Sitharaman is expected to present the budget for 2026-27 on February 1, although an official announcement to this effect is yet to be made.
Of the Rs 1.5 lakh crore allocated for states under the scheme for the current fiscal, Rs 56,826 crore was disbursed until November 27 for the execution of 4,106 projects.
Conditional Offtake of Loans
Uttar Pradesh has remained the biggest beneficiary of the scheme this fiscal, with capex loans of Rs 8,465 crore, followed by Assam (Rs 5,042 crore) and Rajasthan (Rs 4,113 crore). While the offtake under the scheme has been slow so far in 2025-26, it’s expected to jump in the last quarter, just like in the last fiscal, the person said.
About one-third of the scheme’s outlay of Rs 1.5 lakh crore for this fiscal is tied to conditions that require states to undertake specific reforms. The offtake of the untied loan amount is usually quick, while that of the tied part is slow and gradual. Uttar Pradesh has remained the biggest beneficiary of the scheme this fiscal, with capex loans of Rs 8,465 crore, followed by Assam (Rs 5,042 crore) and Rajasthan (Rs 4,113 crore).The Centre introduced the scheme, under which states are provided with 50-year interest-free loans, in 2020-21 as part of its broader strategy to focus on capital expenditure to nurse a Covid-ravaged economy back to health fast.
The initial outlay under the scheme was Rs 11,830 crore, which has been raised substantially in recent years to help states keep up their capital spending pace. Elevated public capex also partly made up for elusive private investment in many sectors in the aftermath of the pandemic. The finance minister had earlier said every Re 1 spent on capex has a multiplier effect of Rs 2.45 on the economy in the immediate year, and Rs 3.14 in the following years.