New Delhi, Nov. 6 -- Capital outlay of states is set to accelerate to ~Rs 8.5 lakh crore this fiscal, driven by higher central support and greater fiscal headroom that will enable increased infrastructure spending, according to a Crisil Ratings report.

Urban infrastructure is expected to lead this expansion, with spending momentum strengthening during the second half of the fiscal year. Converting this available fiscal space into actual investment will depend heavily on the timely release of funds and efficient project execution.

The findings stem from an analysis of 18 states, which together account for about 90 per cent of India's gross state domestic product (GSDP). The report noted that capital outlay growth will outpace the ~8.6 pe...