The Union Budget has pegged capital expenditure (capex) at Rs 12.2 lakh crore for the financial year 2026–27, a 9% increase from the Rs 11 lakh crore allocated for FY 2025–26, with experts welcoming the rise but flagging persistent execution challenges.
Capex growth has slowed in the ongoing FY26 after rising 10.5% in FY25, 28.3% in FY24, 25.4% in FY23 and 37% in FY22. As a share of GDP, capex remains broadly unchanged at around 3.1% for both FY 2025–26 and FY 2026–27.
According to the first advance estimates released by the National Statistics Office, India’s real GDP is projected to grow by 7.4% in FY 2025–26, while nominal GDP growth is estimated at 8%.
Presenting her ninth Union Budget, Finance Minister Nirmala Sitharaman said the higher allocation was intended to sustain momentum in infrastructure creation and support long-term economic growth.
“Public capital expenditure has increased manifold from 2 lakh crore in 2014–15 to an allocation of 11.2 lakh crore in 2025–26. In this coming year, that is, financial year 2026–27, I propose to increase it to 12.2 lakh crores to continue the momentum,” she said.
Sitharaman said the government would continue to prioritise infrastructure development in cities with populations of over five lakh, including tier-2 and tier-3 cities that have emerged as key growth centres.
She proposed an allocation of Rs 5,000 crore per City Economic Region over five years for implementation.
While industry experts broadly welcomed the capex increase, they cautioned that execution remains a key concern. Sandeep Upadhyay, Managing Director – Infrastructure Advisory at Centrum Capital, said that while the 2026 Budget positions infrastructure as the engine for India’s next phase of growth, challenges persist.
“Execution risks such as stalled projects necessitate better capex efficiency and stronger state-level coordination. The modest capex growth, compared to pre-Budget expectations of 15–18%, may not fully offset global headwinds while maintaining fiscal discipline,” he said.
Manoranjan Sharma, Chief Economist at Infomerics Valuation and Rating, said the rise in capex was positive given its high multiplier effect.
“Seven high-speed rail corridors were announced, connecting key economic hubs such as Mumbai–Pune, Pune–Hyderabad and Chennai–Bengaluru, aimed at reducing travel time and improving logistics connectivity. This will stimulate employment, enhance productivity and attract private investment. However, implementation capacity, land acquisition issues, cost overruns and financing sustainability remain challenges,” Sharma said.
To boost confidence among private developers during the development and construction phases of infrastructure projects, the finance minister proposed setting up an Infrastructure Risk Guarantee Fund to provide prudently calibrated partial credit guarantees to lenders.
The Budget also proposes establishing new Dedicated Freight Corridors connecting Dankuni in the east to Surat in the west, and operationalising 20 new National Waterways over the next five years.
It further proposes developing seven high-speed rail corridors between cities as growth connectors: Mumbai–Pune, Pune–Hyderabad, Hyderabad–Bengaluru, Hyderabad–Chennai, Chennai–Bengaluru, Delhi–Varanasi and Varanasi–Siliguri.
To improve last-mile and remote connectivity and promote tourism, Sitharaman proposed incentives to indigenise the manufacturing of seaplanes and announced that a Seaplane VGF Scheme would be introduced to support operations.