Transport and defence investment drive record capital expenditure

The GDP in FY26 is forecast to be Rs 356.97 lakh crore.

Around 55 per cent of FY26 capital expenditure of Rs 11.21 lakh crore will come from investments in roads, railway and armaments.

Financial year 2025-26 is expected to see government’s capital expenditure touch a record high of Rs 11.21 lakh crore. It represents an increase of 10.1 percent over FY25 revised estimate. In terms of relative growth, this is equal to the estimated increase of 10.1 percent of nominal GDP.

The GDP in FY26 is forecast to be Rs 356.97 lakh crore.

As a proportion of GDP, government’s capital expenditure in FY26 will be 3.14 percent. Public sector units are expected to invest Rs 4.3 lakh crore in FY26, which is an increase of 13 percent over their investment planned in FY25.

As in the previous years, the bulk of the government’s capital expenditure will be concentrated in road, railway and defence equipment.

Railway will be the recipient of the single largest chunk of capital expenditure at Rs 2.52 lakh crore in FY26. It will be followed by the road sector at Rs 1.87 lakh crore and defence capital outlay is Rs 1.8 lakh crore.

Put together these three sectors account for about 55 percent of government’s overall capital expenditure.

The capital expenditure in just roads and railway exceeds the outgo on subsidies.
In all about Rs 22 of every Rs 100 the government expects to spend in FY26 will go towards capital expenditure. This is marginally higher than the indication in the revised estimate of FY25.