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Finance Minister Nirmala Sitharaman on Sunday raised the government’s bet on public spending in the Union Budget, proposing to increase capital expenditure to a 12.2 lakh crore in FY2026–27 from 11.2 lakh crore earmarked for the current fiscal, underscoring the continued focus on infrastructure-led growth.
Highlighting the sharp rise in public investment over the past decade, Sitharaman said public capital expenditure has increased manifold from Rs 2 lakh crore in 2014–15 to Rs 11.2 lakh crore in the Budget Estimate for 2025–26.
Presenting the Budget, Sitharaman said the government would continue to focus on infrastructure creation in cities with populations of over five lakh, including tier-2 and tier-3 cities that have expanded into key growth centres.
“We shall continue to focus on developing infrastructure in cities with over five lakh population, that is tier-2 and tier-3 cities, which have expanded to become growth centres,” she said.
The sustained capex push is aimed at crowding in private investment, strengthening urban infrastructure and supporting employment, even as the government remains committed to fiscal consolidation.
This reflects the government’s effort to restrain the pace of public spending growth to remain aligned with fiscal consolidation goals, even as a strong push in capital expenditure is widely seen as critical for achieving India’s ambitions of becoming the world’s third-largest economy and generating large-scale employment.
The Indian economy is seen growing at 7.4% in the current financial year, with inflation expected at near 2%. The government's fiscal deficit for the year is expected at 4.4% of GDP.
Economists see capital expenditure as a key policy lever with a higher multiplier effect, particularly in infrastructure, transport, housing and logistics, which also support manufacturing and services growth.
India’s economic momentum strengthened in the second quarter of FY26, with GDP growth accelerating to a six-quarter high of 8.2%, surpassing expectations and improving on the 7.8% expansion recorded in the April–June quarter. Growth stood at 6.5% and 9.2% in the previous two fiscals.
A significant share of India’s recent economic growth has been attributed to the Centre’s sustained emphasis on capital expenditure, given its strong multiplier effect on economic activity. Capital expenditure primarily includes spending on infrastructure such as roads and railways.
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Presenting the Budget, Sitharaman said the government would continue to focus on infrastructure creation in cities with populations of over five lakh, including tier-2 and tier-3 cities that have expanded into key growth centres.
“We shall continue to focus on developing infrastructure in cities with over five lakh population, that is tier-2 and tier-3 cities, which have expanded to become growth centres,” she said.
The sustained capex push is aimed at crowding in private investment, strengthening urban infrastructure and supporting employment, even as the government remains committed to fiscal consolidation.
This reflects the government’s effort to restrain the pace of public spending growth to remain aligned with fiscal consolidation goals, even as a strong push in capital expenditure is widely seen as critical for achieving India’s ambitions of becoming the world’s third-largest economy and generating large-scale employment.
The Indian economy is seen growing at 7.4% in the current financial year, with inflation expected at near 2%. The government's fiscal deficit for the year is expected at 4.4% of GDP.
Economists see capital expenditure as a key policy lever with a higher multiplier effect, particularly in infrastructure, transport, housing and logistics, which also support manufacturing and services growth.
India’s economic momentum strengthened in the second quarter of FY26, with GDP growth accelerating to a six-quarter high of 8.2%, surpassing expectations and improving on the 7.8% expansion recorded in the April–June quarter. Growth stood at 6.5% and 9.2% in the previous two fiscals.
A significant share of India’s recent economic growth has been attributed to the Centre’s sustained emphasis on capital expenditure, given its strong multiplier effect on economic activity. Capital expenditure primarily includes spending on infrastructure such as roads and railways.
