Centre to meet FY25 capital expenditure estimates despite slow H1

The strong momentum in second-half spending underscores the government’s sustained focus on infrastructure-led growth, even as it navigates fiscal consolidation pressures.

While the final figures are still being tallied, the capex could be between ₹10.2 trillion and ₹10.4 trillion for FY25, exceeding revised projections, said the first person mentioned above, requesting anonymity.

“Capital expenditure (by both Centre and states) witnessed a temporary slowdown in the first half of the fiscal year, largely due to the electoral calendar. However, spending has gained significant traction over the last two quarters," the person mentioned above said.

The Centre had budgeted capex at ₹11.11 trillion for FY25—an 11% increase over the FY24 estimate of ₹10 trillion—before revising the target to ₹10.2 trillion in the latest budget.

Also read | No fiscal constraint on capex; govt’s fiscal prudence firm: FM Sitharaman

The recalibration reflects a balancing act between sustaining public investment and maintaining fiscal discipline, with the Centre on track to achieving a fiscal deficit of 4.8% of gross domestic product (GDP) in 2024-25, marking an improvement from the earlier target of 4.9%, and a further reduction to 4.4% targeted for 2025-26.

To be sure, the ambitious fiscal deficit target for FY25 is underpinned by a record ₹2.11 trillion dividend from the Reserve Bank of India—a 141% surge over last year’s payout.

The windfall offers a critical buffer against potential slippages in tax collections or expenditure overruns, reinforcing the Centre’s commitment to its fiscal consolidation roadmap.

Meanwhile, during the April-February period of FY25, the Centre’s capex stood at ₹8.12 trillion, compared with ₹8.06 trillion in the year-ago period, according to data from the Controller General of Accounts.

The Centre’s capex will have to be about ₹2 trillion in March 2025 to meet the revised target for FY25.

Also read | Govt’s capex appetite in Q4 fails to lift FY25 investment performance

“There has been a discernible pickup in central government spending, with most central ministries and departments encouraged to press the accelerator following a measured start to the fiscal year (FY25)," the second person mentioned above said, requesting anonymity.

“Capital expenditure in March is expected to see a further uptick compared to previous months," the person added.

According to investment bank and financial services firm Jefferies, the central government’s capex is expected to surge by an impressive 25% year-on-year in the second half of FY25.

The Jefferies report also noted that the overall expenditure is expected to surge by 15% annually during the financial year , highlighting that the central government remains committed to investing in infrastructure development.

The Centre’s total expenditure during the April-February period of FY25 stood at ₹38.93 trillion, with the annual estimates for the full financial year standing at ₹47.16 trillion, according to data from the Controller General of Accounts.

Also read | Capex push, fiscal discipline hasn’t come at the cost of social spending cut: Sitharaman

During the same period of the previous fiscal, the Centre’s total expenditure stood at ₹37.47 trillion.

However, rating agency Icra anticipates a modest shortfall in capex relative to the revised estimates for FY25.

To meet the revised estimate of ₹10.2 trillion, the government’s capex would need to expand by about 45% year-on-year in March 2025 alone—an ambitious target, according to the rating agency.

As a result, Icra expects a slight undershooting of the capex goal, though this is expected to be offset by lower-than-expected disinvestment receipts and any overshooting in revenue expenditure.

A spokesperson of the ministry of finance didn’t respond to emailed queries.