Centre eyes ₹12 trillion capex in FY27 as private investment stays cautious
The Centre plans to raise FY27 capital spending to ₹12 trillion, betting on infrastructure-led growth as private investment remains cautious amid global uncertainty.
The Centre is preparing to double down on public investment, planning to raise capital expenditure by about 7% to nearly ₹12 trillion in FY27, according to two people aware of the matter. The move signals that public investment will continue to play a central role in supporting growth as private capex remains uneven and global uncertainty persists.
The proposal reflects the government's continued reliance on infrastructure spending to support domestic demand amid geopolitical risks, trade uncertainty and volatile financial conditions that have kept private investors cautious.
The planned increase assumes the government will close the current financial year without fiscal slippage despite sharp cuts in goods and services tax (GST) and income tax rates, aided by savings on the revenue account and improved fund utilization by implementing agencies, one of the people cited above said.
In FY26, the Centre allocated ₹11.21 trillion for capital expenditure, marking a 10% jump over the previous year’s revised estimates, along with an additional ₹3.9 trillion as grants to states for their own capital spending. Total capex spending as of November 2025 stood at about ₹6.6 trillion or 59% of the budget allocation.
More than 85% of the Centre’s effective capital expenditure is concentrated in four areas—road transport and highways, railways, defence, and transfers to states for infrastructure projects.
Policymakers believe these segments, which have shown strong utilization in recent years, merit continued support to accelerate asset creation.'
Utilization trends
As of the third week of December, Railways had spent nearly ₹2 trillion, or close to 80% of its over ₹2.5 trillion capex allocation for the current year. The road transport ministry had spent about ₹2 trillion, or roughly 79% of its allocation, official data showed.
Both sectors are expected to exhaust their capex well before the fiscal year-end, strengthening the case for higher allocations in FY27.
Railways has already indicated it would require a ₹2.76 trillion allocation next year to modernize trains and improve safety systems, Mint reported on 19 November.
The government has steadily increased capex in recent years to upgrade infrastructure, create jobs and boost growth. The ₹11.21 trillion allocation for FY26 marked modest growth over the previous year’s ₹11.11 trillion, maintaining continuity rather than acceleration.
However, the post-pandemic period saw a sharp ramp-up, with capex rising from ₹4.3 trillion in FY21 to ₹9.5 trillion in FY24.
Private investment lag
Private investment picked up after Covid but has struggled to revive its “animal spirits". In FY24, private non-financial corporations invested ₹29.68 trillion, marginally below ₹29.73 trillion in FY23.
As a share of total fixed investment, private capex declined from 34.6% in FY22 to 32.4% in FY24, data from the statistics ministry showed.
In contrast, combined central and state capex rose from ₹8.75 trillion (12.5% of GDP) in FY22 to ₹12 trillion (13.2% of GDP) in FY24.
Economist view
“With external uncertainties likely to linger into 2026, strength in domestic demand will be critical, especially as the government now has relatively few conventional fiscal levers left," said Rumki Majumdar, economist at Deloitte India.
“A continued capex push will remain one of the key drivers of domestic demand and growth next year," she added.
“A higher capex outlay in FY27 would signal continuity of the government’s efforts to build core infrastructure, helping lower production and logistics costs and improve competitiveness—conditions needed to crowd in private and foreign investment."
India’s capex target for FY26 stands at ₹11.21 trillion, or about 3.1% of GDP, compared with ₹11.11 trillion, or roughly 3.4% in the previous year’s budget. Effective capex including state grants is estimated at ₹15.48 trillion.
“India has historically underinvested relative to its potential," said Rishi Shah, partner and economic advisory services leader at Grant Thornton Bharat.
“Currently at around 32% of GDP, there’s significant headroom. Comparable economies invest 35–38% of GDP to sustain 7–8% growth. Maintaining capex at 3.1–3.2% of GDP through FY27 reflects pragmatic policymaking."
Beyond headline spending, India must improve project execution through regulatory easing, faster clearances and easier access to finance, Majumdar said.
“Public–private partnerships will need to play a larger role across power, urban infrastructure and ports if momentum is to be sustained."
Shah added that quality investments generate long-term gains. “The Golden Quadrilateral’s returns are still accruing two decades later. These are supply-side enablers, not just demand-side stimulus."
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