Is Public Capex Momentum Strong in FY26 with Core Growth at 16%?
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Synopsis
India's public capital expenditure shows impressive growth, with the Centre's spending up 43% YoY in the first five months of FY26. This report outlines how core capital expenditure has also risen significantly, signaling a strong investment trend across key sectors. Discover the implications for India's economic future.
Key Takeaways
- Public capital expenditure in India shows robust growth.
- Centre's outlay increased by 43% YoY.
- Core capex grew by 16%, indicating sustained investment.
- Significant spending observed in defence, transport, and telecom.
- FY26 marks a shift towards frontloaded expenditure.
New Delhi, Oct 10 (NationPress) India's public capital expenditure has demonstrated robust momentum during the initial five months of FY26, with the Centre's capital outlay experiencing a significant 43% year-on-year (YoY) increase, while States' capital expenditure rose by approximately 14%, according to a report released on Friday.
The Centre has utilized nearly 39% of its allocated capex, while states have expended 21%, as per findings from Emkay Global Financial Services.
Although the overall figures may seem inflated due to base effects and sector-specific irregularities, Emkay Research highlights that the “core capex,” after accounting for one-off items, recorded a substantial 16% growth, reflecting ongoing investment activity in critical sectors.
The report emphasized that FY26 has shifted towards a frontloaded expenditure approach compared to FY25, when capital expenditure was backloaded due to general elections.
This strategy enabled the government to meet its full-year targets, even with potential weaker spending anticipated later in the year, as indicated by the report.
“In the first five months of FY26, the Centre’s capital outlay has surged, suggesting that even if the remaining months see an 8% contraction, the government would still meet its projected growth target of 6.6%,” the report noted.
Emkay Research warned that the Centre's capital expenditure growth is significantly influenced by extraordinary factors, such as the telecom sector expenditure—mainly equity infusions into BSNL and financing for BharatNet—which skyrocketed over 722% YoY to Rs 179 billion.
Additionally, the Rs 500 billion advance to the Food Corporation of India constitutes a significant element of the Centre’s capital expansion. Furthermore, loans provided to states have increased markedly, now making up about 20% of the Centre’s capex, compared to under 10% in FY22.
Even when these outliers are considered, core sectors such as defence and transport are demonstrating real capital expenditure traction, crucial for sustaining India’s investment-led growth narrative, stated Madhavi Arora, Lead Economist at Emkay Global Financial Services.
Defence spending has escalated by 54% YoY, railways by 9%, and roads and highways by 11%, while sectors like housing and urban infrastructure continue to lag.
Point of View
It is essential to underscore the resilience of India’s capital expenditure in FY26. The significant increases in both Centre and State spending, alongside core sector growth, reflect a commitment to sustaining investment-led growth. This approach will likely play a pivotal role in shaping the country’s economic trajectory moving forward.
NationPress
10/10/2025
Frequently Asked Questions
What is the current status of India's public capital expenditure?
India's public capital expenditure has shown strong momentum, with a 43% YoY increase from the Centre and a 14% rise from the States in the first five months of FY26.
How does core capex growth impact the economy?
The 16% growth in core capex indicates sustained investment activity in crucial sectors, essential for India's long-term economic growth.
What are the main drivers of capital expenditure growth?
Key drivers include significant investments in the telecom sector and advances to the Food Corporation of India, along with strong spending in defence and transport.
How does the FY26 expenditure compare to previous years?
FY26 has seen a shift towards frontloaded expenditure, contrasting with FY25's backloaded spending due to elections. This strategy aims to meet full-year targets effectively.
What sectors are lagging behind in capital expenditure?
Sectors like housing and urban infrastructure are currently lagging in capital expenditure compared to defence, transport, and railways.
