India Budget: In a move aimed at crowding in private investment and maintaining economic growth momentum, the government has proposed to raise its capital spending by 8.9% next fiscal from this year, with heightened focus on asset creation in tier 2 and tier 3 cities.
Presenting the budget, finance minister Nirmala Sitharaman said the government’s FY27 capex outlay is pegged at Rs 12.2 lakh crore, against the budget estimate of Rs 11.2 lakh crore for the current fiscal.
While the Centre’s capex has grown manifold over the past decade (it was just Rs 2 lakh crore in FY15), the hike in outlay has remained particularly high since the pandemic, as the government bets on the high multiplier effect of such productive spending to nurse a Covid-ravaged economy back to health fast.
Elevated government capex also seeks to partly offset the impact of an elusive broad-based resurgence in private investments amid external headwinds, most recently the additional US tariffs.
Kuljit Singh, partner and infrastructure leader at EY India, said the budget can be renamed as ‘infrastructure budget’ as the sector has been its biggest beneficiary.
Jagannarayan Padmanabhan, senior director and global head, consulting, at Crisil Intelligence, said the outlay is broadly in line with expectations, though still below the estimated requirement of approximately 3.5% of GDP.
“This underscores the need for accelerated private sector participation in core infrastructure, with asset monetisation likely to remain a key lever for crowding in private capital over the medium term,” he said. “With roads and railways accounting for nearly 50% of the outlay, alongside targeted initiatives will lower logistics costs and advance the Viksit Bharat agenda.”
The government will also set up an Infrastructure Risk Guarantee Fund to calibrate partial credit guarantees to lenders, a move aimed at strengthening the confidence of private developers during infrastructure development and construction phase.
Besides, it proposes to come up with a scheme for enhancement of construction and infrastructure equipment (CIE) to strengthen domestic manufacturing of high-value and technologically-advanced machinery.
This will include lifts in multi-story apartments, fire-fighting equipment, large and small, to tunnel-boring equipment for building metros and high-altitude roads.
“Further, there are a slew of measures announced for encouraging manufacturing of construction and infra equipment, which should reduce dependence on foreign equipment, improve indigenisation and result in lower costs for the infra sector,” Singh said.
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While the Centre’s capex has grown manifold over the past decade (it was just Rs 2 lakh crore in FY15), the hike in outlay has remained particularly high since the pandemic, as the government bets on the high multiplier effect of such productive spending to nurse a Covid-ravaged economy back to health fast.
Elevated government capex also seeks to partly offset the impact of an elusive broad-based resurgence in private investments amid external headwinds, most recently the additional US tariffs.
Kuljit Singh, partner and infrastructure leader at EY India, said the budget can be renamed as ‘infrastructure budget’ as the sector has been its biggest beneficiary.
Jagannarayan Padmanabhan, senior director and global head, consulting, at Crisil Intelligence, said the outlay is broadly in line with expectations, though still below the estimated requirement of approximately 3.5% of GDP.
“This underscores the need for accelerated private sector participation in core infrastructure, with asset monetisation likely to remain a key lever for crowding in private capital over the medium term,” he said. “With roads and railways accounting for nearly 50% of the outlay, alongside targeted initiatives will lower logistics costs and advance the Viksit Bharat agenda.”
The government will also set up an Infrastructure Risk Guarantee Fund to calibrate partial credit guarantees to lenders, a move aimed at strengthening the confidence of private developers during infrastructure development and construction phase.
Besides, it proposes to come up with a scheme for enhancement of construction and infrastructure equipment (CIE) to strengthen domestic manufacturing of high-value and technologically-advanced machinery.
This will include lifts in multi-story apartments, fire-fighting equipment, large and small, to tunnel-boring equipment for building metros and high-altitude roads.
“Further, there are a slew of measures announced for encouraging manufacturing of construction and infra equipment, which should reduce dependence on foreign equipment, improve indigenisation and result in lower costs for the infra sector,” Singh said.
