Capital Expenditure To Get 10-15% Boost In Budget 2026: Experts

The government is likely to maintain its focus on capital expenditure in the upcoming Budget, with a 10-15 per cent increase in the capex target from the current level of Rs 11.21 lakh crore, as private sector players remained cautious.

The upcoming Budget, which is likely to be tabled in Parliament on February 1, is going to have a lot of headroom for increasing the public capex, and the government should utilise this opportunity, according to experts.

"I believe that the capital expenditure absorption capacity in the economy is not very high. If you want to increase it by 30 per cent overnight, it is not going to happen because you need the capacity of the construction companies, you need the capacity of the heavy earth-moving machinery, you need so many machines," PwC Partner and Economic Advisory Services leader Ranen Banerjee told PTI.

"So, it cannot increase 30 per cent overnight. So, therefore, we believe that about a 10 per cent increase on the capex is what we can expect, and about Rs 12 trillion of allocation is what we are expecting." Having missed the target for the current financial year, Finance Minister Nirmala Sitharaman had proposed to spend Rs 11.21 lakh crore towards capital expenditure (capex) for FY26.

Against the Budget estimates of Rs 11.11 lakh crore for capex, the government is expected to spend Rs 10.18 lakh crore in Revised Estimates for FY25.

According to Icra chief economist Aditi Nayar, the issue with private capex has actually been that it is uneven, not slow across all sectors.

Traditional sectors like cement and steel are putting in money for expansion, as this extra capacity is the result of increased public investment, generating demand for the private sector.

Greenfield sectors like data centres, electric vehicles, and renewable energy are witnessing significant positivity and capex growth, whereas export-oriented sectors and those facing stiff import competition are facing a more challenging situation, she said.

As far as the government's own fiscal is concerned, she said, "I think FY27 could be a year where we hope that capex will be prioritised by the government simply because FY28 is when the pay revision will come in and it will be much more difficult at that point to really set aside a lot for additional capex.

So, she said FY27 would see a lot of push towards higher government capex.

Asked about the quantum jump in capex, Nayar said it is going to be faster than the anticipated nominal GDP growth rate of 9.5-10 per cent for FY27.

"I would at least hope to see a 12-15 per cent capex growth if at all the fiscal space is there within the budget," she added. 

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