Centre's capex thrust intact, FY27 target at Rs 12.22 lakh cr, Pg5

Key Highlights:

• The government has allocated Rs 12.22 lakh crore for FY27 capital expenditure, an 11.5% increase from the revised estimate of Rs 10.96 lakh crore for FY26.
• This capex level remains at 3.1% of GDP, signaling the Centre's continued focus on public investment amid struggling private investments.
• Road transport and highways, along with railways, constitute 64.8% of the Centre's total capex allocation for FY27.
• Defence capex is estimated at Rs 2.19 lakh crore in FY27, compared to Rs 1.86 lakh crore in FY26, marking the third-highest allocation.

Detailed Insights:

• The Centre's capital expenditure has sharply increased over the last decade, with FY27 target significantly higher than the Rs 3.08 lakh crore spent in FY19.
• The FY26 revised estimate for capital expenditure is Rs 10.96 lakh crore, which is lower than the budgeted Rs 11.21 lakh crore.
• Government's focus on capex is expected to support cyclical growth recovery and strengthen India's structural growth trend by improving manufacturing competitiveness and services sector attractiveness.
• The combined capital outlay for road transport and highways along with railways is estimated to account for 64.6% of the total capex for FY26.
• Excluding allocation for telecom, the capex growth falls to 9.6%.
• Under the Scheme for Special Assistance to States for Capital Investment, Rs 2 lakh crore has been allocated for FY27 as 50-year interest-free loans to states.

Key Concepts Involved:

• Capital Expenditure (Capex): Funds used by a company to acquire or upgrade physical assets such as property, buildings, or equipment.
• Fiscal Glide Path: A strategy to gradually reduce the fiscal deficit as a percentage of GDP over a period of time.
• Revised Estimate (RE): A mid-year review of budget figures, taking into account the actual expenditure and revenue trends.