Odisha’s Fiscal Tightrope: Social Spending Surges as Capital Outlay Faces 15% Contraction
BHUBANESWAR — As the Odisha government initiates the high-stakes transition toward the 2026-27 fiscal roadmap, a sophisticated economic story is unfolding in the state’s ledgers. While the administration has successfully scaled its social safety nets to historic levels, a sudden 15% contraction in capital expenditure is forcing a strategic re-evaluation of how the state balances immediate welfare with long-term infrastructure. Chief Minister Mohan Charan Majhi’s original ₹2.9 lakh crore budget for the current year was built on the premise of investment-led growth, yet as the February budget window approaches, the reality of fiscal execution shows a state navigating a complex “mixed bag” of performance.
The most pressing challenge for policymakers remains the “Capex conundrum.” By the end of the third quarter of 2025-26, capital expenditure the vital spending that creates roads, bridges, and industrial assets stood at roughly ₹22,835 crore. This represents only 2.9% of the Gross State Domestic Product (GSDP), a sharp departure from the government’s ambitious target of 6.1%. While major projects in urban development and irrigation are physically moving forward, the 15% year-on-year decline in asset-creating spend suggests that bureaucratic bottlenecks or shifting departmental priorities have slowed the momentum of the state’s infrastructure ambitions.
Conversely, the state’s commitment to “Viksit Odisha” is being fueled by a robust surge in social and programme spending. Total expenditure for the first nine months of the fiscal year reached ₹1,42,226 crore, capturing nearly half of the total budget estimate. Specifically, programme expenditure which covers essential welfare schemes and disaster preparedness rose to 46% of its annual allocation, up from 44% in the previous year. This indicates a deliberate pivot toward human capital development and immediate social relief, ensuring that even as the state navigates a tighter fiscal corridor, its most vulnerable populations remain shielded.
As the Finance Department now calls for updated expenditure details from various ministries, the upcoming 2026-27 budget is expected to be a balancing act of historic proportions. Policy watchers anticipate a renewed focus on restoring Capex momentum to bridge the current shortfall, alongside a heavy emphasis on job creation and the agricultural sector. The state is also expected to lean into the ‘Purvodaya’ initiative and federal assistance schemes to sustain its growth trajectory. Ultimately, the challenge for the next fiscal year will be to translate high-level intent into rapid implementation, ensuring that Odisha’s revenue surplus is leveraged not just for survival, but for a sustainable, high-growth future.
