The higher the amount the government can allocate for capex, the better it is for the country, as it contributes directly to capacity-building and public infrastructure.

Ideally, no entity, be it an individual, a household, or a nation, should spend more than what they earn. But all nations spend more, and all of them borrow, leading to a fiscal deficit, which is the difference between the total revenue receipts and expenditure. 

In the case of a fiscal deficit, its quality is as important as its quantity. If the fiscal deficit is bad, the revenue deficit (the excess of revenue expenditure over total revenue receipts) will be worse. Revenue expenditure is essential, committed, and unavoidable expenditure, such as the salaries and pensions of government employees, interest payments on debt and subsidies, among others. Revenue expenditure is not spent on building any assets for the economy — that is, for capital expenditure. 

Revenue Deficit

The revenue deficit went down from 3.1% of GDP in 2013-14 to 1.7% in 2024-25, and then 1.5% in the current fiscal; for 2026-27, too, it is pegged at 1.5%. Major subsidies, including fertiliser subsidy, are a big drain on the exchequer. 

The revenue deficit has been coming down owing to the decreasing percentage of revenue expenditure in total expenditure. In 2013-14, the total expenditure stood at ₹15.59 lakh crore, of which the revenue expenditure was ₹13.71 lakh crore; in other words, the revenue expenditure comprised about 88% of total government spending.

The situation improved by 2017-18, when the revenue expenditure came down to 78.8%. In the current fiscal, it will be 71.7%, while in 2026-27, it is estimated to decline further to 67.9%. 

Private Sector Participation

The rather limited participation of the private sector in infrastructure-building has been a major cause for concern. It was stated in the Economic Survey 2025-26 that, “The public sector efforts alone cannot meet India’s growing infrastructure requirements. While public investment remains crucial, a multi-pronged financing approach is essential to attract the requisite investments from the private sector and long-term institutional investors."

To boost the confidence of private entities in infrastructure construction and development, Union Finance Minister Nirmala Sitharaman had proposed to set up an Infrastructure Risk Guarantee Fund to provide prudently calibrated partial credit guarantees to lenders.

Hopefully, the government’s continued high spending on capex, combined with efforts to bring private investment, will further boost infrastructure development.

(The writer is a freelance journalist. Views are personal.)