FM Sitharaman increases India’s capex to Rs 12.2 lakh crore in FY27 Budget

Capex spending in FY27 Budget

• India's capex allocation to cross Rs 12.2 lakh crore for FY27, per Union Budget
• Capex rise signals focus on public investment amid slow private sector growth
• Survey urges stable policies to boost private investment and capex benefits

Did our AI summary help?

India’s capital expenditure allocation is set to cross Rs 12.2 lakh crore for the first time in FY27, according to the Union Budget presented by Finance Minister Nirmala Sitharaman on February 1. The increase underscores the government’s continued emphasis on public investment as a key lever to support growth at a time when private capex remains uneven.

The Budget estimate is broadly in line with the Moneycontrol poll of 20 economists, which had projected nominal GDP growth of 10.1 percent and capital spending of around Rs 12 lakh crore in the coming fiscal. Even though the pace of increase in capex has slowed, the headline number marks a meaningful rise from the Rs 11.21 lakh crore allocated in the previous year’s estimates.

The moderation in growth becomes clearer in a year-on-year comparison. Between FY25 and FY26 estimates, the government had raised capital expenditure by just Rs 10,000 crore, reflecting fiscal constraints as consolidation efforts gathered pace.

Against that backdrop, crossing the Rs 12.2 lakh crore mark signals a renewed push to keep public investment elevated, even as revenue growth normalises.

The government is betting that sustained capex will help revive private investment, which has so far remained muted and concentrated in a handful of sectors.

The thrust is consistent with the Economic Survey, released on January 28, which made a strong case for protecting capital expenditure. The Survey argued that capex delivers more durable gains in household incomes and living standards than transfer-led spending, by improving infrastructure, supporting employment and raising productivity.

At the same time, the Survey cautioned that uncertainty—particularly sector-specific regulatory and policy uncertainty—has a disproportionate dampening effect on private capital formation. To address this, it called for simpler, more predictable regulatory frameworks, targeted deregulation and stable policy regimes, especially in sectors that are highly sensitive to uncertainty shocks.