Government Spending on Major Infrastructure Initiatives to Fuel Growth in 2025-26: Study

New Delhi, Jan 13 (NationPress) The Centre’s capital expenditure on substantial infrastructure projects, including highways, railways, and power development, alongside investments in critical sectors like defence, are set to drive India’s economic growth in the fiscal year 2025-2026 and beyond, according to a report by financial services firm Prabhudas Lilladher (PL).

“An uptick in momentum is already observable in railways, defence, power, data centers, and more, with execution expected to hasten growth in FY26 and beyond,” the report notes.

The government has earmarked a substantial Rs 11.1 lakh crore for infrastructure projects in the 2024-25 budget, with expectations for this amount to rise further in the upcoming budget for 2025-26.

Projected initiatives to stimulate the economy could provide the essential boost needed to enhance demand and support sustainable growth, as outlined in the report.

The upcoming budget is anticipated to play a crucial role in steering economic recovery, with a focus on growth aimed at encouraging middle-class spending, particularly with inflation subsiding.

Moreover, sectors like healthcare, tourism, discretionary consumption, and financialisation are expected to gain from the recovery, as per the report.

Support for the report's insights on economic revival is evidenced by a surge in industrial growth, which reached a six-month peak of 5.2 percent in November, up from 3.5 percent in October of the current financial year (2024-25), according to data from the Ministry of Statistics.

This increase also represents a significant rise compared to the 2.5 percent industrial growth recorded a year earlier in November 2023.

Manufacturing sector growth, which constitutes over three-fourths of the Index of Industrial Production (IIP), accelerated to 5.8 percent in November 2024 from 4.1 percent in October. This is promising for job creation, as the sector is crucial for providing quality employment to young graduates emerging from the country’s engineering institutes and universities.

Data on use-based classification indicates that capital goods production, which includes machines utilized in factories, increased significantly by 9 percent. This category reflects genuine investment in the economy, which has a multiplier effect on job creation and income generation in the future.

Additionally, there was a remarkable 13.1 percent rise in the production of consumer durables, such as electronic goods, refrigerators, and TVs during November 2024, showcasing heightened consumer demand for these products amid increasing incomes.