Budget 2026: Govt may raise capex spending 10–15%; private investment remains uneven

The government is likely to retain its strong focus on public capital expenditure in the upcoming Union Budget 2026, with the capex outlay expected to rise by 10–15 per cent from the current level of Rs 11.21 lakh crore, even as private sector investment continues to remain cautious, experts said, as reported PTI.The Budget, which is scheduled to be tabled in Parliament on February 1, has adequate fiscal headroom to step up public capital spending, and the government should use this opportunity to sustain growth momentum, economists noted.“I believe that the capital expenditure absorption capacity in the economy is not very high. If you want to increase it by 30 per cent overnight, it is not going to happen because you need the capacity of the construction companies, you need the capacity of the heavy earth-moving machinery, you need so many machines,” PwC Partner and Economic Advisory Services leader Ranen Banerjee told PTI.“So, it cannot increase 30 per cent overnight. Therefore, we believe that about a 10 per cent increase on the capex is what we can expect, and about Rs 12 trillion of allocation is what we are expecting,” he said.Finance Minister Nirmala Sitharaman had proposed a capital expenditure outlay of Rs 11.21 lakh crore for FY26, after the government is expected to fall short of its target in the current year. Against the Budget estimate of Rs 11.11 lakh crore for FY25, capex spending is estimated at Rs 10.18 lakh crore in the Revised Estimates.According to ICRA Chief Economist Aditi Nayar, the challenge with private capex is not a broad-based slowdown but uneven investment across sectors.Traditional sectors such as cement and steel are seeing expansion, largely driven by higher public investment that has created demand for private players. At the same time, greenfield sectors like data centres, electric vehicles and renewable energy are witnessing strong investment momentum, she said.However, export-oriented sectors and industries facing stiff import competition continue to face a more difficult environment, limiting private investment appetite, Nayar added.On the government’s own spending outlook, Nayar said FY27 could see a stronger capex push, as fiscal flexibility may narrow in subsequent years.“I think FY27 could be a year where we hope that capex will be prioritised by the government simply because FY28 is when the pay revision will come in and it will be much more difficult at that point to really set aside a lot for additional capex,” she said.Asked about the likely pace of growth, Nayar said public capital expenditure is expected to expand faster than the projected nominal GDP growth of 9.5–10 per cent for FY27.“I would at least hope to see a 12–15 per cent capex growth if at all the fiscal space is there within the Budget,” she added.