India’s economy: General govt capex-to-GDP might stay around 5%; lower that FY25 and FY24

India’s general government capital expenditure (capex) is expected to stay close to 5% of GDP in FY26, slightly below 5.1% recorded in FY25 and well under the FY24 peak of 5.4%, according to .

The report, cited by ANI showed that for the first five months of this fiscal, public capital expenditure has remained strong. Over the period, the Centre spent about 39% of its budgeted capital outlay, marking a growth of over 43%.

"If the trend sustains, FY26 general government capex/GDP is likely to hit approx. 5%, although it may still fall short of that in FY25P (5.1%) and log much lower than the FY24 peak of 5.4%," the report said.

State governments have also shown progress, with their capex rising 14% so far, though this is below the 30% growth they had budgeted for the year.

The report noted that while some factors like base effects and sector-specific anomalies have boosted the Centre’s overall capex numbers, the noise-adjusted "core capex" has also seen solid growth over the past three quarters, signalling steady improvement in productive .

States have performed well in recent years, achieving about 89% of their budgeted capex over the last two fiscal years, compared with a 10-year average of around 80%. This came despite slower revenue growth and ongoing spending on welfare schemes, which kept revenue expenditure high.

The report added that the Centre’s timely release of capex loans to states has helped sustain this momentum. If current trends continue, the overall general government capex-to-GDP ratio for FY26 is expected to reach roughly 5%. For states, the ratio could rise slightly to 2.4%, the second-highest since FY17, though still short of the 2.7% target in their FY26 budgets.

Emkay Research said the continued focus on capital spending by both the Centre and states is a positive sign for investment and economic growth.