India’s Union Budget 2026 is just around the corner, and all eyes are on one key driver: capital expenditure, or capex. With the economy facing global headwinds like potential US tariffs and moderating private investment, the government’s infra-led strategy could be the game-changer. Experts predict a hefty ₹12 lakh crore-plus outlay for FY27, building on FY26’s ₹11.2 lakh crore base. This isn’t just numbers on a page – it’s about roads that cut travel time, railways that connect dreams, and defence tech that secures the future. But will this capex surge deliver the 7-7.5% GDP growth we crave, or stumble on execution hurdles? Let’s dive deep.
Why Capex is Budget 2026’s North Star
Picture this: India’s infra deficit has long been a bottleneck, inflating logistics costs to 14% of GDP – double that of China. Enter capex, the government’s weapon to fix it. In FY26, Centre’s capex hit ₹11.2 lakh crore (3.2% of GDP), with total outlay including CPSEs and states crossing ₹19 lakh crore. Utilization? A solid 58.7% by November, despite Q3 slowdowns.
For Budget 2026, SBI Research forecasts a 10% jump to over ₹12 lakh crore in FY27, aligning with Viksit Bharat’s vision. PHDCCI goes bolder, urging ₹2.98 lakh crore incremental spend annually over five years – that’s 2.6% GDP addition! Why now? Private capex remains tepid at 30% of total investments (down from 40% pre-COVID), so public money must crowd it in. Fiscal deficit stays glide-path compliant at 4.0-4.2%, signaling prudence amid bond market jitters.
But here’s the human angle: Capex isn’t cold steel and cement. It’s jobs for millions – think labourers in Bihar laying highways or engineers in Tamil Nadu wiring solar farms. Multipliers kick in: every ₹1 in roads generates ₹2.5-3 in economic activity via steel demand, trucking, and tourism.
Breaking Down Sectoral Capex: Winners and Multipliers
Roads and railways? They’re the capex kings, gobbling 62.8% of infra pie. FY26 saw ₹2.72 lakh crore for highways (NH expansion to 2 lakh km) and ₹2.52 lakh crore for Indian Railways ( electrification 95% complete, Vande Bharat fleet doubling). Expect FY27 continuity: 10-12% hikes, pushing utilization to 70%+.
Defence gets a firepower boost – 12-15% to ₹1.8-2 lakh crore. Indigenization via Atmanirbhar Bharat means more orders for L&T, Bharat Electronics. Think Tejas Mk2 fighters, not imports.
Power and renewables? Strategic pivot. Transmission lines to evacuate 500 GW RE by 2030, plus Battery Energy Storage Systems (BESS). Urban infra via Smart Cities 2.0, ports under Sagarmala – all primed for 15-20% jumps.
Electronics and semiconductors shine with Scheme 2.0: ₹50,000 crore outlay for fabs in Gujarat, Assam. Critical minerals mining gets ₹10,000 crore to slash China reliance.
| Sector | FY26 Allocation (₹ lakh Cr) | FY27 Expected Growth | Key Multiplier Impact | Top Beneficiaries |
|---|---|---|---|---|
| Roads | 2.72 | 10-12% | Logistics cost -20%; GDP +0.5% | L&T, NCC, IRB Infra |
| Railways | 2.52 | 8-10% | Freight share to 45%; Jobs +5L | RVNL, IRCON, Titagarh |
| Defence | 1.75 | 12-15% | Mfg exports $5B; Indigenization 70% | BEL, HAL, Mazagon Dock |
| Power/RE | 1.20 | 15% | RE capacity +50GW; Discom fix | NTPC, Tata Power, Adani Green |
| Urban/Ports | 0.85 | 12% | Housing PMAY 2Cr units | DLF, HUL, Container Corp |
This table screams opportunity: Roads alone could revive cement (UltraTech, Ambuja) and steel (Tata Steel, JSW).
Economic Ripple: GDP, Jobs, and Inflation Tame
Deep dive into multipliers: ICRA pegs infra capex at 2.5-3x GDP impact. ₹12 lakh crore spend? That’s 3-4% direct GDP lift, pushing FY27 growth to 7.5%. Jobs? Infra is labour-lite but catalytic – 10 crore man-days in FY26, scaling to 15 crore. Skilling via 5 lakh apprenticeships ties in.
Inflation? Capex curbs it long-term by boosting supply (food silos, cold chains). Short-term input spikes (sand, steel) manageable via e-auctions.
Private capex revival is key. Tax sops like extended PLI 2.0, LTCG limit to ₹2 lakh, and standard deduction to ₹1 lakh will nudge corporates. EPC order books bulge: L&T at ₹4.5 lakh crore, 25% YoY growth.
Global context: US tariffs under Trump 2.0 hit exports? Capex builds domestic moats – make in India for semiconductors, EVs.
Challenges: Execution Risks and the Private Puzzle
Not all rosy. FY26 Q3 capex contracted 14%; recovery needs 28% H2 sprint. Land acquisition delays plague 30% projects; public order in states like Manipur adds friction.
Capex skew: 57% manufacturing, 22% power – great for machines, less for jobs. Labour absorption needs MSME infra parks.
Fiscal math: Revenue shortfalls from GST tweaks cap ambitions. States’ capex lags at 40% utilization; interest-free loans must rise to ₹1.5 lakh crore.
Private capex? Stalled by high rates (repo 6.5%), NPAs. RBI cuts to 6% could unlock ₹2 lakh crore.
Stock Market Playbook: Ride the Capex Wave
Markets love continuity. Nifty Infra up 15% pre-budget last three years. Bet on:
- EPC Giants: L&T (target ₹4,200), NCC (₹350) – order inflows galore.
- Materials: UltraTech Cement (₹12,000), JSW Steel (₹1,000) – volume surge.
- Power Plays: NTPC (₹450), Power Grid (₹380) – capex execution.
- Rail/Defence: RVNL (₹650), BEL (₹350).
Avoid consumption; focus quality capex proxies. Debt rally if fiscal glide holds.
Long-Term Vision: Viksit Bharat by 2047
Budget 2026’s capex isn’t a one-off – it’s Phase 2 of ₹100 lakh crore National Infra Pipeline. By 2030: 3.5% GDP on infra, logistics to 8%, exports $2 trillion.
For households: Cheaper goods via efficient supply chains. For investors: Compounding returns from infra mutuals (up 20% CAGR).
FM Sitharaman’s halwa ceremony signals D-day. Watch for ₹12.5 lakh crore surprise, defence mega-push.
In sum, capex is India’s growth engine revving up. Execution delivers; slippages disappoint. For your portfolio and career, it’s the story to track. What’s your capex bet? Share below in comment section!
