Budget 2026: At 4.4% of GDP, capex hits highest level in a decade

NEW DELHI: Finance minister Nirmala Sitharaman not only chose to retain the Centre’s focus on capital expenditure, but also announced that at 4.4% of GDP it had hit the highest level in at least a decade.

In her ninth consecutive budget speech, she proposed a record public capital expenditure of Rs 12.2 lakh crore for 2026-27, about 15% higher than the revised estimate (RE) of current financial year. Among ministries, the highest allocation of over Rs 2.9 lakh crore has been given to road transport and highway, followed by railways (about Rs 2.8 lakh crore) and defence (over Rs 2.2 lakh crore).

“Public capex has increased manifold from Rs 2 lakh crore in FY 2014-15 to an allocation of Rs 11.2 lakh crore in BE 2025-26. In FY2026-27, I propose to increase it to Rs 12.2 lakh crore to continue the momentum,” she said. In her post-Budget interaction with reporters, the FM said this is 4.4% of the GDP and is the “highest at least in the last 10 years, it could even be the highest if you were to take data of earlier period”.




As per the Budget document, for the second successive year, the capex target was missed. In 2024-25, the actual capex was Rs 10.5 lakh crore against the BE of Rs 11.1 lakh crore, and during the current fiscal, the capex has been revised downwards to Rs 10.9 lakh crore compared to Rs 11.2 lakh crore.

In addition to direct capex, the Centre is also working with states to support some of their public investment as this is seen to be crucial for generating demand for other sectors and boosting overall economic activity and job creation.

In her speech, Sitharaman also announced the setting up of an Infrastructure Risk Guarantee Fund to provide prudently calibrated partial credit guarantees to lenders, to strengthen the confidence of private developers regarding risks during infrastructure development and construction phase.