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Govt expects FY26 capex to exceed estimates: Finance Ministry sources - BusinessToday

The Indian government is optimistic about surpassing its capital expenditure (capex) targets for the fiscal year 2025-26 (FY26), according to sources from the Finance Ministry. This ambitious outlook reflects the government's continued focus on infrastructure development and economic growth, as capex plays a pivotal role in driving long-term investments in critical sectors such as roads, railways, urban infrastructure, and digital connectivity. The emphasis on exceeding estimates underscores the administration's commitment to bolstering the country's economic framework through sustained public spending, even as it navigates global economic uncertainties and domestic fiscal challenges.

Capital expenditure, which refers to funds allocated by the government for creating or acquiring long-term assets, has been a cornerstone of India's economic strategy in recent years. The government has consistently prioritized capex to stimulate economic activity, create jobs, and enhance the overall productivity of the economy. For FY26, the Finance Ministry sources indicate that the government is not only aiming to meet the budgeted targets but is also preparing to exceed them, signaling a robust push towards infrastructure-led growth. This approach aligns with the broader vision of transforming India into a $5 trillion economy and achieving developed nation status by 2047, as outlined in various policy frameworks and public statements by top officials.

The optimism surrounding FY26 capex stems from several factors. First, the government has been working on streamlining processes to ensure faster project implementation and fund utilization. Delays in project execution have historically been a significant bottleneck in achieving capex targets, often due to bureaucratic hurdles, land acquisition issues, and regulatory clearances. However, recent reforms aimed at improving coordination between central and state governments, as well as the adoption of digital tools for project monitoring, have started yielding positive results. These measures are expected to accelerate the pace of infrastructure development in the coming fiscal year, thereby enabling the government to surpass its capex goals.

Additionally, the Finance Ministry is focusing on enhancing the quality of expenditure rather than merely increasing the quantum of funds allocated. This involves prioritizing projects with high economic multipliers—those that generate significant returns in terms of job creation, regional development, and connectivity. For instance, investments in highways, urban metro systems, and rural infrastructure are seen as critical drivers of economic activity, as they not only improve logistics and mobility but also spur demand in related sectors such as construction, steel, and cement. By channeling funds into such high-impact areas, the government aims to maximize the socioeconomic benefits of its capex outlay for FY26.

Another key factor contributing to the positive outlook is the government's strategy to leverage public-private partnerships (PPPs) and innovative financing mechanisms. Recognizing the limitations of relying solely on budgetary resources, the administration has been actively encouraging private sector participation in infrastructure projects. This includes offering incentives, reducing risks for investors, and creating a conducive policy environment for PPPs. Moreover, the government has been exploring alternative funding avenues such as asset monetization, where existing public assets are leased or sold to raise capital for new projects. These efforts are expected to supplement the budgetary capex and provide the necessary financial cushion to exceed the FY26 targets.

The Finance Ministry sources also highlighted the role of state governments in achieving the national capex objectives. While the central government plays a leading role in funding and policy formulation, the execution of many infrastructure projects depends on the efficiency and cooperation of state administrations. To this end, the central government has been providing financial assistance and technical support to states, encouraging them to ramp up their own capex spending. Schemes that incentivize states to undertake reforms and improve their infrastructure spending capacity are likely to be a key focus area in the FY26 budget planning. This collaborative approach is essential for ensuring that the benefits of increased capex are distributed equitably across regions, addressing disparities in development and fostering inclusive growth.

Furthermore, the government's capex push for FY26 is set against the backdrop of a recovering global economy and evolving domestic priorities. While challenges such as inflation, supply chain disruptions, and geopolitical tensions persist, the Indian economy has shown resilience, supported by strong domestic demand and policy measures. The Finance Ministry's confidence in exceeding capex estimates reflects a belief that sustained public investment can act as a buffer against external shocks while laying the foundation for long-term economic stability. Infrastructure development, in particular, is seen as a catalyst for attracting foreign direct investment (FDI), as improved connectivity and modern facilities enhance India's appeal as a global business destination.

The sectoral allocation of capex for FY26 is expected to prioritize areas that align with national goals such as sustainability, digital transformation, and self-reliance. For instance, significant investments are likely to be directed towards renewable energy projects, smart cities, and digital infrastructure to support the country's transition to a greener and more technology-driven economy. At the same time, traditional sectors like transportation and housing will continue to receive substantial funding to address existing gaps and meet the needs of a growing population. This balanced approach ensures that the capex strategy remains forward-looking while addressing immediate developmental challenges.

The Finance Ministry's optimism is also underpinned by the government's track record in recent years. Despite the economic disruptions caused by the COVID-19 pandemic, India has managed to maintain a strong focus on capex, with successive budgets reflecting an upward trajectory in infrastructure spending. This consistency has helped build investor confidence and create a virtuous cycle of growth, where public investment crowds in private capital, further amplifying economic outcomes. For FY26, the government appears determined to build on this momentum, using capex as a tool to drive structural transformation and position India as a global economic powerhouse.

In conclusion, the Indian government's expectation of exceeding its FY26 capex estimates, as conveyed by Finance Ministry sources, reflects a strategic and ambitious approach to economic development. By focusing on efficient project execution, high-impact investments, private sector collaboration, and state-level coordination, the administration aims to maximize the impact of its capital expenditure. This push is not only about meeting numerical targets but also about creating a robust infrastructure ecosystem that supports long-term growth, job creation, and regional equity. As the country prepares for the FY26 budget, the emphasis on capex underscores a broader vision of building a resilient and inclusive economy capable of withstanding global challenges while capitalizing on emerging opportunities. The success of this strategy will depend on the government's ability to address implementation bottlenecks, mobilize resources effectively, and maintain policy consistency in the face of evolving economic dynamics. If achieved, surpassing the FY26 capex targets could mark a significant milestone in India's journey towards sustainable and inclusive development, reinforcing its position as one of the world's fastest-growing major economies.

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[ https://www.businesstoday.in/latest/economy/story/govt-expects-fy26-capex-to-exceed-estimates-finance-ministry-sources-483904-2025-07-09 ]