FinMin looks to widen infrastructure plans for capital expenditure push

Looking to intensify its public capital expenditure (capex) booster for the economy, the Centre is reviewing the scope for increasing infrastructure spending to support growth, and examining the existing project pipeline to identify areas that can absorb higher capex than currently planned, according to official sources in the know.

 

“The government will continue the momentum on capex. It is a priority,” said an official. The finance ministry, it is learnt, will initiate parleys with key ministries that can drive capital expenditure or capex, such as the Ministry of Railways and the Ministry of Road Transport and Highways, to assess how many more projects they can take up in financial year 2025-26 (FY26). The government is also looking to spur capacity building in shipbuilding and port development, which is another thrust area for enhancing public infrastructure investments.

 

According to data from the Controller General of Accounts (CGA), public capex rose 54 per cent year-on-year (Y-o-Y) in the April-May period of FY26. It must be noted that such spending was subdued in the same period last year owing to the timing of the general election.   

 

Experts say that, given the higher capital spending by the Centre in April-May of FY26, there is room to raise the capex target beyond the budgeted ₹11.2 trillion. Aditi Nayar, chief economist at Icra, said that given the buffers on the receipts side, the government could increase capex by ₹80,000 crore in FY26, which would take the Y-o-Y growth to 14.2 per cent. 

 

On the revenue side, the government saw 10 per cent growth in tax receipts through April and May. However, a higher-than-budgeted dividend from the Reserve Bank of India (RBI) helped reduce the fiscal deficit to ₹13,160 crore, or 0.8 per cent of FY26 BE, in the April-May period. The RBI dividend has triggered a 41.8 per cent jump in non-tax revenues on a Y-o-Y basis in April-May FY26, according to CGA data.

 

“It makes sense to raise capex if there’s fiscal space,” said Madan Sabnavis, chief economist at Bank of Baroda. “Private sector investment is still sluggish, so the government has to frontload capex and do the heavy lifting. Apart from rail and road, defence could be another area to push investment.”

 

The Ministry of Railways has spent 21 per cent of its Budget Estimate (BE) in April-May FY26, incurring around ₹52,073 crore, compared to 20 per cent of the BE in the same period last year. The Ministry of Road Transport and Highways, another heavy capex spender, disbursed ₹59,638.58 crore — 22 per cent of its BE in April-May FY26, up from 21 per cent in the same period of 2024-25.