Budget Forecast: Infra Capex Set To Rise, But Private Investment Remains Sluggish

In fact, effective capex, which comprises Central government spending on infrastructure and grants in aid for the creation of capital assets (for States), stood at ₹1,548,282 crore in 2025-26.

With effective capex nearing the fiscal deficit, which is ₹1,568,936 crore, the quality of fiscal deficit shows tremendous improvement. This quality has a bearing on the ratings by sovereign rating agencies such as Fitch and Moody’s.

Will the government continue to allocate huge funds for infrastructure building? There is no reason to assume that there would be any let-up in capital expenditure.

Private Sector Engagement

Private sector engagement, however, has not shown promising results. Union Finance Minister Nirmala Sitharaman wants investment by private companies to increase. In October last year, Sitharaman had said that private sector investment was beginning to see opportunities in India, with revived interest in public-private partnership (PPP) projects.

The government’s expectations are not unreasonable. It managed to improve the health of banks. The profitability of public sector banks has improved, with net profits rising from ₹1.05 lakh crore in 2022-23 to ₹1.78 lakh crore in 2024-25. The issue of "twin balance sheet" has also been addressed. 

Capex Allocations

All this has been done while augmenting capex allocations.

The introduction of the goods and services tax (GST) largely revamped indirect taxation. And the regime was recently fine-tuned. Corporate taxes have been slashed. In Budget 2025-26, there was also a big relief for personal income taxpayers.

The government has introduced various measures to enhance the ease-of-doing business. This was augmented by production-linked incentive (PLI) schemes to boost manufacturing. Efforts to formalise micro, small, and medium enterprises (MSMEs) also yielded results.

While foreign direct investment (FDI) has not flowed into the country as expected, some global players, including Microsoft and Google, have shown interest. Microsoft recently committed to invest $17.5 billion (₹1.5 lakh crore) in India, which would be its largest-ever investment in Asia, over the next four years, in an effort to scale up the AI infrastructure, deepen cloud capacity, and train millions in advanced digital skills.

Alphabet's Investment Bid

In October, Google’s parent company, Alphabet, announced to invest $15 billion to build an AI data hub in Andhra Pradesh.

Meanwhile, India Inc has been urging the government to keep investing big in infrastructure. In its pre-budget recommendation, the Confederation of Indian Industry (CII) called for National Infrastructure Pipeline (NIP) 2.0, with an investment commitment of ₹150 lakh crore over the next five years, and 12% increase in the Centre’s capital expenditure for 2026-27.

The prominent business chamber also recommended a 10% increase in capex support to the States.

Hurdles In Project Implementation

All said and done, the real progress is measured on the ground, and not on paper. Projects in various infrastructure segments have run into unexpected delays, higher costs, and other hurdles. Recently, Minister of Road Transport and Highways Nitin Gadkari had said that the 574 highway projects awarded in the last five years will cost ₹3.6 lakh crore more than expected. 

Given such a scenario, the experts and policymakers should also take measures to address challenges that arise during project implementation. 

As far as the capex is concerned, the government has been doing heavy lifting. And it is likely to continue to do so, with hopes that private investments will soon follow suit.

(The writer is a senior journalist specialising in policy reporting. Views are personal.)