Analysts don’t expect a significant jump in allocation to capital expenditure (capex) in this year’s budget as they are of the view that the government must first try and fix the gaps in spending for better impact on the economy. In fact, analysts feel the government must focus more on encouraging private investment.
Many analysts TNIE spoke to put the capex allocation in the 11.6-12 lakh crore range for FY27 while estimating a lower than budgeted capex in the current financial year. The growth in capex has been pegged at 8-10% in FY27. This would include the target-based capex loan provided to the states.
Even within the government, there is a feeling that there should be some stock-taking of the quality of capex. “The last Budget signalled a pause to review and reassess priorities rather than continue spending mechanically. The focus is now shifting from simply raising the capital share of the Budget to identifying gaps in public goods and infrastructure and directing spending more strategically to address those gaps,” said a senior government official on the condition of anonymity.
The government had last year budgeted for Rs 11.21 lakh crore capex allocation in the FY26. However, analysts feel the government might spend not more than Rs 11 lakh crore in the current financial year. In the April-November 2025 period, the government has spent Rs 6.6 lakh crore.
Dharmakirti Joshi, chief economist at Crisil Limited, says the central government's capital expenditure can be budgeted to grow in line with the rate of nominal GDP and should be complemented by measures to encourage private investment. The nominal GDP has been pegged to grow at 10%.
According to Radhika Rao, chief economist at DBS Bank, the Centre’s capex budget in FY27 would stay around 3.0-3.1% of GDP, up 7-8% yoy from FY26, with an emphasis on identifying shovel-ready and greenfield projects.
QuantEco, an independent economic research firm, also expects the government to announce a capex growth of 7-8% for FY27. “While the pace of growth may appear lower compared to post COVID years, it needs to be seen from the perspective of capex budget having grown more than 3x between FY20 and FY26, it says adding that the government must also create fiscal space to fund the 8th Pay Commission likely to be paid out in FY28 accompanied by crowding in of private sector capex,” it said.
Of late, the private sector capex has seen an uptick. According to Centre for Monitoring Indian Economy (CMIE), new investment proposals during the first three quarters of 2025-26 at Rs.27.5 lakh crore were 14.8% higher than in the first three quarters of 2024-25, when they were at Rs.24 lakh crore.