The ministries of road transport and highways and railways have exceeded the national average capital expenditure (capex) by spending 63 per cent and 57 per cent of Budget estimates, respectively, in the first half of financial year 2025-26. The total capital expenditure for April–September FY2025-26 stood at 52 per cent of the Budget estimates (BE), according to the latest data from the Controller General of Accounts (CGA).
Which ministries led capital expenditure growth in H1 FY26?
The surge in capex includes Rs 500 billion disbursed to the Department of Food and Public Distribution against a budget allocation of Rs 20 crore for FY26. Without this exceptional amount, the increase in total government capital expenditure stood at 47.3 per cent of BE FY26 in the first half of the fiscal year.
An analysis of ministries with a minimum allocation of Rs 3,000 crore under capex showed that among those lagging in expenditure were the Ministry of Petroleum and Natural Gas and the Department of Economic Affairs, both utilising only 2 per cent of their allocations in H1 FY26. The Department of Science and Technology had not utilised any of its capex allocation of Rs 20,096 crore, according to CGA data.
How does FY26 capex compare with last year’s performance?
Overall capital expenditure for the April–September period of FY2026 increased by 40 per cent compared to the corresponding period in the previous year, reaching Rs 5.8 trillion—outpacing the budgeted growth of 6.6 per cent.
“The government has been doing the heavy lifting on capex but now they would show caution since there would be pressure on revenue due to shortfall in GST collections. However, with consumer sentiment now improving, we will see more private sector investment picking up,” said Madan Sabnavis, chief economist, Bank of Baroda.
What is the fiscal impact of higher capital spending?
Experts pointed out that the rise in capital spending has been accompanied by a sharp contraction in revenue expenditure. An analysis by Motilal Oswal noted that revenue spending stood at Rs 17.2 trillion in April–September FY26, or 44 per cent of FY26 BE—the lowest in at least a decade.
“We believe the fiscal deficit remains manageable despite higher defence spending. We see a possibility of 10-basis-point slippage risk due to trailing revenue receipts. But the positive in fiscal math is that revenue expenditure is yet to pick up,” the Motilal Oswal report said.
Can the government stay on track with its fiscal deficit target?
A report by Nomura said capex would need to contract by about 15 per cent in the second half of the fiscal year to prevent a slippage in the fiscal deficit target. Economists, however, believe the government will manage to stay within its target since capex is discretionary spending and can be adjusted, helping maintain the fiscal deficit goal of 4.4 per cent.
Finance Minister Nirmala Sitharaman reiterated on Tuesday that the government remains confident of meeting the 4.4 per cent fiscal deficit target in FY2025-26 before shifting its focus to reducing the debt-to-GDP ratio from the next financial year onwards.
