Budget 2026 raises FY27 capex 11.5% to ₹12 trillion, eyes infra growth

Union Budget 2026-27 raises capital expenditure to ₹12.2 trn, reinforcing the govt's infrastructure-led growth strategy, even as spending in the current fiscal is expected to fall short of estimates

The Centre is continuing to push the pedal on capital expenditure (capex) in Budget 2026-27 with the allocation seeing an increase of 11.5 per cent to ₹12.2 trillion from ₹10.9 trillion in the revised estimates (RE) of FY26.

 

The government is, however, expected to fall short of budgeted capital expenditure in the current financial year by ₹25,335 crore or 2.3 per cent against the target of ₹11.2 trillion in the Budget Estimates (BE). 

 

At ₹12.2 trillion, capex currently stands at 3.1 per cent of the gross domestic product (GDP) for FY27.

 

In terms of effective capex, which also includes grants in aid for creation of capital assets, the capex is 4.36 per cent of GDP, which is close to the fiscal deficit target of 4.3 per cent in FY27.

 

“The total capex increase is greater than the increase in overall expenditure. The government may be reaching its absorptive capacity in the roads and railways sector but now they are picking up in newer areas. It is a positive take away from the Budget,” said Madan Sabnavis, chief economist, Bank of Baroda.

 

Finance Minister Nirmala Sitharaman — in her Budget speech — highlighted that the public capex allocation has increased manifold from ₹2 trillion in FY15 to ₹11.2 trillion in BE 2025-26.

 

“During the past decade, our government has undertaken several initiatives for largescale enhancement of public infrastructure, including through new financing instruments such as Infrastructure Investment Trusts (InVITs) and Real Estate Investment Trusts (Reits) and institutions like NIIF and Nabfid,” the finance minister said.

 

Budget 2026-27 has announced an Infrastructure Risk Guarantee Fund to strengthen the confidence of private developers.

 

Experts feel that the government is now focusing on quality spending with long-term return and income generating capacity.

 

“The focus is not just on scale, but on crowding in private participation through better risk sharing and diversifying spending from highways to urbanisation. It also includes spending on energy, targeted investments in dedicated freight corridors, high-speed rail connectors, national waterways, improvement in ports, and logistics-linked manufacturing,” Rumki Majumdar, economist, Deloitte India, said.

 

For the first nine months of the current financial year, capital expenditure rose 15 per cent compared to the corresponding period in the previous financial year, according to data released by the Controller General of Accounts (CGA).

 

Capex during April-December was higher at 70 per cent of the BE compared to 61.7 per cent in FY25.

 

CGA data showed that capex declined in December 2025 by 24.5 per cent over the corresponding month of the previous year.