The pullback in public investment could dampen growth impulses, though robust state capex and seasonal festive consumption are expected to cushion the blow. After a stellar 16.7% expansion in Q2, the combined central-state capex settled at 4.2 lakh crore rupees—marginally below last year’s 4.4 lakh crore.

States stole the show, with 24 entities posting 21.9% growth in capex and net lending. Their total outlay surged to 2.1 lakh crore from 1.8 lakh crore, rivaling central spends and marking a sharp recovery.

ICRA forecasts quarterly GDP growth at 7.2%, a notch down from 8.2%, still fortified by holiday demand and structural reforms like GST. Aditi Nair, ICRA’s lead economist, pointed to base effects, capex moderation, state revenue sluggishness, and export weakness as growth moderators.

Revenue expenditure trends improved: Central non-interest spends dropped just 3.5% versus 11.2% earlier, while states grew 2.7%. Nationally, this category rose 0.3%, flipping Q2’s dip.

As fiscal year progresses, this data highlights the balancing act between prudence and propulsion. States’ vigor offers optimism, but economists urge vigilant monitoring of central impulses to sustain India’s high-growth trajectory amid evolving global dynamics.