New Delhi, Nov. 9 -- Capital outlay by states is expected to rise to around Rs 8.5 lakh crore in the current fiscal, supported by higher central assistance and greater fiscal flexibility, with urban infrastructure likely to drive spending growth, according to a report by Crisil Ratings.

The report highlighted that an analysis of 18 states, accounting for around 90 per cent of India's gross state domestic product (GSDP), estimates that these states will achieve 84 per cent of their aggregate budgeted capital outlay, compared with 82 per cent last fiscal and a five-year average of 85 per cent. Growth is also expected to exceed the 8.6 per cent recorded last year.

The outlook is supported by a 33 per cent increase in the Special Assistance...