Spending on Growth
According to the State Bank of India (SBI), the central government's capital expenditure is anticipated to surpass Rs 12 lakh crore in Financial Year 2027
(FY27). This represents a year-on-year growth of about 10 percent. The SBI report has highlighted the consistent rise in government-led capital spending over the years, signifying a sustained focus on infrastructure development and economic expansion within the nation. The report emphasized that capital expenditure through the budget saw a remarkable increase from Rs 2.5 lakh crore in FY16 to Rs 11.2 lakh crore in FY26, according to budget estimates. These figures strongly emphasize the government's commitment to investment in capital assets, which, in turn, fuels economic development. Grants for the creation of capital assets have also observed a rising pattern, escalating from Rs 1.3 lakh crore in FY16 to Rs 4.3 lakh crore in FY26. This augmentation highlights increased assistance for asset creation at different government tiers.
Capex Expenditure Rising
Capital expenditure, a critical indicator of economic development, continues its upward trajectory. By FY27, government-led capital spending is set to exceed Rs 12 lakh crore, marking a substantial increase. This growth reflects a clear governmental emphasis on enhancing infrastructure. This persistent push aims to stimulate economic progress and facilitate the construction of national assets. Capital expenditure by Central Public Sector Enterprises (CPSEs), funded via internal and extra-budgetary resources, stood at Rs 4.3 lakh crore in FY26. By combining budgetary capital expenditure and grants, the effective capital expenditure experienced a considerable rise over the years, eventually reaching Rs 15.5 lakh crore in FY26. The total capital expenditure, which incorporates budgetary spending, grants for capital assets, and CPSE capital expenditure, expanded from Rs 7.0 lakh crore in FY16 to Rs 19.8 lakh crore in FY26. As a percentage of GDP, capital expenditure remained strong, at approximately 5.5 percent in FY26, highlighting the government’s unwavering commitment to infrastructure-led growth.
Borrowing and Loans
The SBI report also offers insights into the borrowing landscape. It estimates that the net central government borrowing for FY27 is likely to reach around Rs 11.7 trillion, which is close to 70 percent of the fiscal deficit. Repayments are projected to be around Rs 4.60 trillion, including an anticipated buyback of Rs 1 lakh crore and estimated switches totaling Rs 1.5 trillion. Regarding the states, gross borrowings are projected at Rs 12.6 trillion, with repayments estimated at Rs 4.2 trillion. The report highlights the possibility of optimizing State Development Loans (SDLs) through meaningful reforms, potentially easing the burden of net state borrowings. It also suggests that net central borrowings could be managed through increased borrowing via treasury bill issuance. These elements underscore the meticulous financial planning involved in sustaining economic growth.
Global Economic Outlook
The SBI report also touches upon the broader economic context, noting that the presentation of the Union Budget comes amidst heightened global uncertainty. It draws attention to the emerging global realignment and its ripple effect on financial markets, where volatility has surfaced due to misplaced trust in stretched equity and bond markets. The report also addresses concerns regarding crude oil prices, questioning whether crude could break away from the supply-driven stability and join the wider commodity rally, even if temporarily. These observations underscore the importance of navigating an ever-changing global environment, including financial markets. The Union Budget 2026 is scheduled to be presented on Sunday, February 1st.
