The report highlighted a sustained rise in government-led capital spending, reflecting the Centre’s continued focus on infrastructure creation and long-term economic growth. “Government capex may cross ₹12 lakh crore in FY27, a YoY growth of approximately 10 per cent,” the SBI report said.
Budget data cited in the report showed that central government capital expenditure has risen sharply over the past decade, increasing from ₹2.5 lakh crore in FY16 to ₹11.2 lakh crore in FY26, as per budget estimates. Grants for the creation of capital assets have also witnessed a steady rise, growing from ₹1.3 lakh crore in FY16 to ₹4.3 lakh crore in FY26, indicating higher support for asset creation across various levels of government.
Capital expenditure by Central Public Sector Enterprises (CPSEs), funded through internal and extra-budgetary resources, stood at ₹4.3 lakh crore in FY26. When budgetary capex and grants are combined, effective capital expenditure rose to ₹15.5 lakh crore in FY26. The grand total capex, including budgetary spending, grants for capital assets, and CPSE investments, increased from ₹7 lakh crore in FY16 to ₹19.8 lakh crore in FY26.
As a share of GDP, capital expenditure remained robust at around 5.5 per cent in FY26, underscoring the government’s infrastructure-led growth strategy.
On the fiscal side, the report estimated net central government borrowing for FY27 at around ₹11.7 trillion, close to 70 per cent of the fiscal deficit. Repayments are projected at about ₹4.6 trillion, including an expected buyback of ₹1 lakh crore and bond switches worth ₹1.5 trillion.
At the state level, gross borrowings are estimated at ₹12.6 trillion, with repayments of around ₹4.2 trillion. The report noted that meaningful reforms could help scale down State Development Loans (SDLs), thereby reducing net state borrowings.
The SBI report also highlighted that the Union Budget is being presented amid heightened global uncertainty, pointing to volatility in equity and bond markets and potential risks from crude oil prices amid a broader commodity rally. The Union Budget 2026 will be presented on Sunday, February 1.
