The central government has planned to increase the capital expenditure to Rs 12 trillion in the financial year 2027. The surprising thing is that despite having an army of veteran billionaire businessmen in the country, the government has to do such big planning. In fact, amid global uncertainty, private investment remains cautious and the government is expressing confidence in infrastructure-based development. Because of which the government is working on this.
Two people with knowledge of the matter said in the Mint report that the central government is preparing to double the government investment and is planning to increase the capex by about 7 per cent to about Rs 12 lakh crore in the financial year 2027. This step indicates that government investment will continue to play a central role in supporting growth. On the other hand, there remains inequality in private investment and global uncertainty persists.
One of the above mentioned people said that this planning is not being done just like that. In fact, despite savings in the revenue account and huge cuts in GST and income tax rates, the government will end the current financial year without any fiscal slippage. In FY2026, the Center allocated Rs 11.21 lakh crore for capex, 10 per cent more than last year’s revised estimates. Additionally, an additional Rs 3.9 lakh crore was allocated to states as grants for their own capex. The total capex till November 2025 was around Rs 6.6 lakh crore or 59 per cent of the budget allocation.
More than 85 per cent of the Centre’s effective capital expenditure is concentrated in four sectors: road transport and highways, railways, defense and state infra projects. Policymakers believe that these sectors, which have seen strong utilization in recent years, require continued support to accelerate asset creation.
where and how much is being spent
By the third week of December, the Railways had spent nearly Rs 2 lakh crore, or 80 per cent of the more than Rs 2.5 lakh crore allocated capex for the current year. According to official data, the Road Transport Ministry had spent about 79 percent of its allocation, or about Rs 2 lakh crore. Both sectors are expected to exhaust their capex before the end of the fiscal year, raising the possibility of higher allocations in FY2027.
Railways has already indicated that it will need an allocation of Rs 2.76 lakh crore next year to modernize trains and improve safety systems. The government has consistently increased capex in recent years to advance infrastructure, create jobs and boost growth. The Rs 11.21 lakh crore allocated for FY 2026 represents a marginal increase compared to last year’s Rs 11.11 lakh crore, implying continuity rather than acceleration. However, the post-pandemic period saw a sharp increase in capex, from Rs 4.3 lakh crore in FY2021 to Rs 9.5 lakh crore in FY2024.
decline in private investment
Private investment picked up pace after the Covid pandemic, but it is facing difficulty in restarting. In FY2024, private non-financial corporations invested Rs 29.68 lakh crore, slightly less than Rs 29.73 lakh crore in FY2023. According to statistics ministry data, the share of private capex in total fixed investment declined from 34.6 percent in FY 2022 to 32.4 percent in FY 2024. In contrast, the joint capex of the Center and the state increased from Rs 8.75 lakh crore (12.5% of GDP) in FY 2022 to Rs 12 lakh crore (13.2% of GDP) in FY 2024.
What do economists say?
Rumki Majumdar, economist at Deloitte India, said that with external uncertainties likely to persist through 2026, a strong domestic demand will be important, especially as the government now has a relatively limited number of traditional fiscal measures. He further said that one of the key drivers of domestic demand and growth next year will be sustained growth in capex.
India’s capex for FY 2026 is Rs 11.21 lakh crore, about 3.1 per cent of gross GDP, while in last year’s budget it was Rs 11.11 lakh crore, about 3.4 per cent. If the money given to the state is also included, the total capex is estimated at Rs 15.48 lakh crore.
Rishi Shah, partner and head of economic advisory services at Grant Thornton India, said India has historically invested less than its potential. At present there is a lot of scope for investment at about 32 percent of GDP. Comparable economies invest 35-38 percent of GDP to maintain a growth rate of 7-8 percent.