Centre shifts focus from size of public capex to quality and impact of spending, to rope in AI to monitor projects
Investments are expected to translate into real gains such as durable assets, private-sector participation and productivity improvements rather than mere higher budgetary allocations.
New Delhi: India’s policymakers are increasingly shifting focus from expanding the size of public capital expenditure to improving its quality and impact, including the use of data analytics and artificial intelligence (AI)-driven tools to monitor progress, two people aware of the matter said.
The government is emphasizing project execution, transparency and measurable economic outcomes to ensure that investments translate into real gains such as durable assets, private-sector participation and productivity improvements rather than mere higher budgetary allocations, the people said. To this extent, greater due diligence and closer scrutiny of projects are now central to improving execution.
“The emphasis is on transparency, timely completion and the multiplier effect of public spending, ensuring that each rupee of investment delivers measurable benefits," the first person said on condition of anonymity. “The government plans to introduce a formal quality and impact assessment framework for all infrastructure projects before providing central capital support. Ministries seeking additional capital outlays from the finance ministry will now be required to present detailed plans on how the funds will create long-term, productivity-enhancing assets."
Until now, allocations to infrastructure ministries have been largely based on their annual spending capacity, with limited qualitative evaluation of end-use. However, from the next financial year, budgetary capex support will be explicitly linked to projects that demonstrate clear economic, social or environmental returns, the person said.
“The move is aimed at ensuring better targeting of public investment, aligning capital spending with national growth priorities and crowding in private investment," the person added.
India's capital expenditure target stands at ₹11.21 trillion, according to the budget for FY26, compared with the estimate of ₹11.11 trillion in the previous year. However, the effective capital expenditure for FY26 is projected at ₹15.48 trillion, against ₹13.18 trillion in the previous fiscal, which includes core capital outlays in the Union Budget, and grants and aid allocated to states for creating capital assets.
Additional spending
The Centre can increase infrastructure spending beyond ₹11.21 trillion for this financial year, with officials indicating that an additional ₹20,000-30,000 crore could be spent if private investment remains sluggish amid global headwinds, Mint reported on 23 September.
The Centre’s capex stood at ₹5.8 trillion during the April-September period, or 51.8% of the estimate for FY26, from ₹4.15 trillion during the year-ago period, or 37.3% of the annual estimate.
Artificial intelligence is set to play a critical role in this transition, the second person said, asking not to be identified.
“The Centre plans to deploy data analytics and AI-driven tools for project appraisal, monitoring and performance tracking to minimize cost overruns and enhance transparency," the person added.
The Standing Committee on Finance has recommended establishing an indigenous, government-owned AI server to address privacy concerns, improve efficiency and harness data for informed decision-making, a proposal the government is examining.
A spokesperson of the finance ministry didn’t respond to emailed queries.
Economists said that while the government has steadily ramped up capital spending over the past six years to build critical infrastructure such as roads, airports and ports, the next phase must focus on sharpening the quality and efficiency of such investments and make them more targeted.
“Given the complexities involved in large, capital-intensive infrastructure projects with long gestation periods and vast geographic reach, AI can emerge as a critical enabler in optimizing decisions across multiple factors and ensuring investments deliver maximum returns," said Rumki Majumdar, an economist with Deloitte India. “Predictive analytics, on the other hand, are more data-driven, and AI can use such analytics and help anticipate challenges such as land acquisition and resource allocation with greater accuracy. Besides, such analysis can enable proactive and reactive maintenance to extend asset life."
Costs, outcomes
Majumdar added that the government’s use of technology in planning and executing capex projects will cut costs and enhance outcomes such as targeted job creation and income growth.
Rishi Shah, partner and economic advisory services leader at Grant Thornton Bharat, said real-time financial monitoring systems have proven their value in strengthening accountability within government institutions.
“Critically, data-driven systems reduce risks by minimizing human discretion in fund utilization decisions, thereby improving the overall quality of capital expenditure," he said. “Overall, it’s a step in the right direction as all parts of government need to work in tandem with the latest tech available."
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