Indian states' increased thrust on capex has also been accompanied by a shift in spending, with states focusing more on transport infrastructure, according to a Moneycontrol analysis of state finances data released by the National Stock Exchange.

The data on capex spending by 21 states, which account for 95 percent of the country’s GDP, shows that the share of transport in capital expenditure is likely to be 39 percent in FY25 compared with 30 percent a decade ago.

On the other hand, there has been a pivot away from rural development, where capex spending is likely to decline to 26 percent compared with 40 percent a decade ago.

Social sector spending has witnessed a similar disruption.

Water supply and sanitation now account for a larger share of capex spend in the social sector spending category than a decade ago, while family welfare, social security, and housing have lost ground.

This change could also be due to a shift in programmes, where the centre is spending more resources on activities like housing, leaving states to focus on other parameters.

One area where the situation hasn’t changed is urban development, where the share of spending has remained around 20 percent for the better part of the decade.

Education capex remained stagnant at around 11-12 percent until FY23, only rising to 15 percent in FY24. It is likely to be higher at 15.5 percent in FY25.

Public health expenditures have also remained constant during this period and are likely to decline to 14.9 percent in FY25 from 16 percent in FY24.

India’s spending on health and education has remained below the recommended 6 percent level. A recent study by World Inequality Lab with Thomas Piketty as one of the co-authors recommended levy of wealth tax and use the funds for funding health and education.