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Budget expectations from infrastructure sector

Budget 2025 focuses on enhancing India's infrastructure with significant capital outlay for key sectors like roads, railways, power, and steel. It aims to boost private investment, ensure continued growth, and drive sustainability through increased budget allocation and asset monetisation strategies

January 24, 2025 / 12:58 IST
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infrastructure
a strong impetus on infrastructure investments planned for the future.

By K Ravichandran

The Indian infrastructure sector is poised to sustain its healthy growth momentum over the medium term, supported by a healthy capex outlay across various infrastructure sub-segments. During FY2019-FY2025, the capital outlay by the Government of India has witnessed a robust CAGR of ~24%, primarily driven by significant outlays in the Road, Railways, and Defence sectors.

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The Government of India’s (GoI) gross capital outlay at Rs. 11.1 trillion in the FY2025 Revised Budget Estimate (RBE) entails a YoY growth of 17.1% over Rs. 9.5 trillion recorded in FY2024 Provisional Actuals (PA). However, the actual capex undertaken by the GoI during April-November 2024 contracted by 12.3% to Rs. 5.1 trillion (46.2% of FY2025 RBE) from Rs. 5.9 trillion during April-November 2023 (61.7% of FY2024 PA), owing to the lull seen during the General Elections, followed by the monsoon-led slowdown in H1 FY2025. ICRA believes that a large shortfall is likely in FY2025 (Rs. 9.7 trillion) against the target (Rs. 11.1 trillion). This, however, will create an opportunity for a ~12-13% increase in capital expenditure in FY2026, amounting to ~Rs. 11 trillion, which will help support growth in the next fiscal and bring private capex.

Overall, the GoI needs to incur a capex of ~Rs. 1.5 trillion per month during December-March FY2025 to meet the FY2025 RBE, which entails a considerable expansion of ~65% on a YoY basis. This appears rather challenging, and at this juncture, ICRA expects the capex target of Rs. 11.1 trillion for FY2025 to be missed by ~Rs. 1.4 trillion. ICRA anticipates adequate allocation towards infrastructure-led sectors including roads, railways, highways, etc., in FY2026, while the outlay for interest-free capex loans can be retained at the FY2025 budgeted amount of Rs. 1.5 trillion.