Budget 2026: Capex Outlay Set for Significant Jump

The Indian government is preparing to maintain a strong emphasis on public capital expenditure in the upcoming Union Budget 2026. Experts anticipate a notable increase of 10-15% in the capex outlay, potentially pushing it beyond the current ₹11.21 lakh crore. This strategic move is intended to sustain the nation's growth trajectory, even as private sector investment continues to exhibit caution.

Fiscal Space for Growth

Economists suggest that the upcoming budget presents adequate fiscal headroom to escalate public capital spending. They argue this is an opportune moment to leverage available financial capacity to bolster economic expansion. The current projection for capital expenditure in FY26 stands at ₹11.21 lakh crore, though revised estimates indicate a slight shortfall for FY25.

Ranen Banerjee, PwC Partner and Economic Advisory Services leader, noted that rapid increases in capex absorption capacity are challenging due to constraints in construction, machinery, and labor. He anticipates a more measured increase of around 10%, targeting approximately ₹12 lakh crore for the upcoming fiscal year.

Uneven Private Investment Picture

ICRA Chief Economist Aditi Nayar highlighted that private capital expenditure is not uniformly slow but rather shows unevenness across sectors. Traditional industries like cement and steel are expanding, fueled by demand from public projects. Simultaneously, greenfield sectors such as data centers, electric vehicles, and renewable energy are attracting robust investment.

However, export-oriented sectors and those facing intense import competition are experiencing a more challenging environment, dampening private investment appetite. Nayar anticipates that the government might prioritize a stronger capex push in FY27, as fiscal flexibility could narrow in subsequent years leading up to FY28's pay revisions.