Pitch Report: Roads, railways and cement companies expect capex-boost from Budget 2025

In the coming Budget, analysts predict a 15–20 percent year-on-year increase in railway outlay, raising it to Rs 3 lakh crore.

Companies in the core sector are expected to benefit from an increased outlay in capital-expenditure, in the coming Union Budget.

On February 1, the Finance Minister Nirmala Sitharaman will announce the Union Budget 2025-26. Industry insiders expect the government to raise capex allocation to Rs 11.5 lakh crore, from Rs 11.1 lakh crore a year ago, particularly with the slowdown in GDP growth.

Industry watchers expect road networks, railways, renewables, power transmission, defence and new-age infra such as data centres to be given a boost.

In a conversation with Moneycontrol, Krishna Appala of Capital Minds, said that there needs to be a broad-based infrastructure push to recover GDP growth, which fell to 6.4% this fiscal year. "To achieve 7.5% GDP growth, every sector needs to deliver. Heavy equipment, road construction, and power utilities will play pivotal roles," he added. For data centres, some analysts expect tax incentives or even an an inclusion in the Production-linked Incentive Scheme (PLIS).

Also read: Union budget likely to raise major subsidies by 8% to $47 billion in next fiscal

By extension, cement companies should get a relief after demand slowdown--to the extent of 4 percent to 4.5 percent last year--due to seasonal factors and labour shortage from the elections.

Building roads
Road-network development has been one of the biggest beneficiaries of the government's infrastructure push. Over the past five years, India's road network has expanded by 59 percent, becoming the second largest globally at over 6.7 million kilometers, surpassed only by the United States.
Though the intensity of capital expenditure had slackened over the past two years, with social expenditure taking precedence in view of elections, analysts expect public capex to be back in spotlight in the coming Budget and road networks to see a significant increase in allocation. For 2024–25, the Ministry of Road Transport and Highways (MoRTH) was allocated Rs 2.72 lakh crore, with actual expenditure by December 2024 estimated at Rs 1.75–1.8 lakh crore. The Gross Budgetary Support (GBS) this year is expected to increase modestly by 5–6 percent, reaching Rs 2.85–2.9 lakh crore.

Staying on track

In the coming Budget, analysts predict a 15–20 percent year-on-year increase in railway outlay, raising it to Rs 3 lakh crore.

In the previous Union Budget 2024-25, presented on July 23, the Railway Ministry received a record allocation of a little over Rs 2.62 lakh crore for capital expenditure. As of January 5, around Rs 2 lakh crore of the budgetary allocation had been utilised.

Industry observers expect higher spending on passenger rail, including bullet trains and Vande Bharat trains, and cargo rail. In a conversation with Moneycontrol, Aditya Kondawar, Partner and Vice President at Complete Circle Capital, spoke about expected increase in funding for the Bullet Train project, enhancements to the KAVACH safety system, and the integration of artificial intelligence for operations like ticketing. He also spoke about the possible speeding up of Amrit Bharat Station Redevelopment Scheme and the development of Gati Shakti Multi-Modal Cargo Terminals (GCT), which would help attract private sector investments in cargo infrastructure.

Cementing the advantage
With increased spending on roads and railways, analysts expect a 8 to 10 percent rise in demand for cement and believe the industry will benefit from tax incentives to promote green cement technologies.