Government may step up capex in Budget to fire up economy

NEW DELHI: The Centre is expected to go ahead with its thrust on capital expenditure and is likely to step up spending in the budget, hoping that a multiplier effect, along with higher consumption demand will boost investment and economic activity.

At the heart of the strategy will be a focus on railways, which may get a higher budgetary allocation of around Rs 2.7 lakh crore in the next financial year, considering the increased number of projects against a little over Rs 2.5 lakh crore allocated for the current financial year. The highway sector may, however, see a minor increase, given that large amounts have been pumped into the sector over the last few years.

There is, however, discussion on stepping up investment in some other areas, for instance, in creating a stronger canal network to help the farming sector in some of the states.

Most ministries, as well as states, which get reform-linked assistance, have responded well to capex push from the Centre at a time when private investment has been slow to pick up.

In current financial year, finance minister Nirmala Sitharaman has budgeted for a 10% rise in capex to Rs 11.2 lakh crore. During April-Oct, the government’s capex was estimated to have increased 13% to Rs 6.7 lakh crore, as against just under Rs 6 lakh crore a year ago, according to the latest numbers.

Data available so far showed that, while railways has spent a little less than Rs 2 lakh crore till this week, nearly 77% of the over Rs 2.5 lakh crore for the full financial year, the spending by the road transport ministry is over Rs 1.8 lakh, approximately 68% of the budgetary allocation for current financial year.

Railway officials said they are expecting an increase in allocation considering the increased pace of laying new lines and more new lines approved by govt. They added that the expenditure usually increases in the second and third years of projects.

The railway’s expenditure is mainly in the area of laying new railway tracks, multi-tracking of existing corridors, completing electrification of the broad-gauge network and procurement of new trains and other rolling stocks such as wagons and locomotives.

In the case of the highways sector, the pace of award of projects has slowed down to barely around 2,000 km till Nov-end against the target of 10,000 km for FY26. Even in 2024-25, the total km awarded for construction was 7,537 km against the target of 10,000 km.

“The continuous fall in award of projects will have an impact on spending. So, the budget requirement for next financial year is likely to be at the current level,” said an official.