NEW DELHI: Mansukh Mandaviya, Minister of Labour and Employment, recently said India must increase allocation for infrastructure spending to Rs 15 lakh crore from the present Rs 11.11 lakh crore.
However, given the fiscal constraints and the likely inability of the government to fully spend the Rs 11.11 lakh crore allocation for capital expenditure (capex) in the current financial year, it is unlikely that the government may hike capex allocation much in the coming budget. Most analysts expect capex allocation to rise by 10-12% over actual capex in FY25.
Analysts have projected the capex allocation for FY26 in the budget to be at the same level as was budgeted for the current financial year – Rs 11.11 lakh crore. Some of them have even lowered the capx allocation to below current year’s budget target -- the reason being sharp fall in Capex spending in FY25 by the central government.
Rating agency ICRA expects the capex allocation for FY26 to be Rs 11 lakh crore, Nomura pegs the capex allocation at Rs 10.7 lakh crore. Morgan Stanley estimates capex allocation in the budget to be Rs 11.2 lakh crore. Aditi Nayar, chief economist, ICRA Ratings says: “…a likely dip in revenue deficit would allow for a capex target of Rs 11 lakh crore for FY26, similar to budget estimate for FY25, albeit 12-13% higher than expected outgo in FY25 (Rs 9.7 lakh crore).”
Nayar’s capex allocation estimate is based on actual capex spends of Rs 9.7 lakh crore against budget target of Rs 11.11 lakh crore. There are reasons for her understating FY25 actual capex spends by Rs 1.4 lakh crore. The government has been slow in spending the amount allocated for capex.
Till November, it had spent Rs 5.13 lakh crore, which is 12% lower than it had spent during the same period last year. “The catchup in capex to meet the budgeted estimates implies a required monthly run rate of Rs 1.5 lakh crore -- a growth rate of 63%,” says Morgan Stanley in a report.
Morgan Stanley expects the full-year capex spending in FY25 to be Rs 9.75 lakh crore, while Nomura pegs it at Rs 9.5 lakh crore. In FY25, the government capex spending was at 9.5 lakh crore. The Centre’s capex allocation includes Rs 1.3 lakh crore given in loan to states for infrastructure spends. Nomura suggests that the government could relax the conditions attached to loans given to states, to enable them to spend more.