Union Budget 2026: FM Sitharaman Raises Capex for FY27 to ₹12.2 Lakh Crore

Presenting the Union Budget for FY27, Union Minister of Finance and Corporate Affairs Nirmala Sitharaman announced an increase in the government’s capital expenditure to ₹12.2 lakh crore, up from ₹11.2 lakh crore a year earlier. The higher capex allocation signals the Centre’s intent to sustain growth momentum amid muted private investment.

Sitharaman stated capex remains a key lever in India's growth engine, with public spending to ₹11.2 lakh crore in Budget Estimate (BE) FY26, compared to ₹2 lakh core in FY15.

Between the FY25 and FY24 estimates, the government had raised capital expenditure by just ₹10,000 crore. The latest increase reflects a renewed push to keep public investment elevated. The capex announcement is broadly in line with industry expectations.

The Economic Survey for FY26 noted that the Centre has progressively scaled up capital expenditure to an average of 2.9% of GDP in the post-pandemic years, compared with an average of 1.7% of GDP in the pre-pandemic period.

Sitharaman said the Centre will continue with its efforts to focus on enhancing infrastructure in cities with populations of over five lakh, including tier-2 and tier-3 cities to expand growth centres. She announced to set up an Infrastructure Risk Guarantee Fund to provide credit guarantees to lenders. The scheme is also proposed with an objective to boost investor confidence with regard to risks during infrastructure development and construction phase.

Sitharaman also proposed to establish new Dedicated Freight Corridors, operationalise 20 new National Waterways over next five years, and setting up of new training institutes.

In a bid to promote environmentally sustainable passenger system, the Centre proposed to develop seven High-Speed Rail corridors between cities as 'growth connectors'. The cities span from Mumbai-Pune, Pune-Hyderabad, Hyderabad-Bengaluru, Hyderabad-Chennai, Chennai-Bengaluru, Delhi-Varanasi, and Varanasi-Siliguri.

Defence allocation is up 21% (BE) on year. The defence sector saw a 4.6% rise in capital outlay in FY26. Meanwhile, railway allocation is up 10% on year.

The Indian economy is expected to grow at 7.4% for the current financial year ending March 31. The government's fiscal deficit for the year is pegged at 4.4% of GDP, with a target to reduce it to 4.3% of GDP for FY27.

Capex, primarily involving spending on roads and railways, remains key growth engine for India's economic resilience owing to higher multiplier effect and crowing in private investments.