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The CareEdge report shows a 15.4% decline in central CapEx and a 10.5% decrease in state CapEx in the first half of FY25, with the Centre only meeting 37% of its budgeted CapEx target and 20 states achieving only 28%.The Centre has only achieved 55% of its highway CapEx target, with the April-November 2024 CapEx standing at INR 1.49 trillion, compared to a record INR 2.72 trillion. Land acquisition delays slowed down projects, with actual spend at INR 144841.67 crore.
The actual expenditure for Railways and Defence Services decreased from the Budget estimate of INR 25,200 crore to INR 15,963.63 crore in FY25 and 43% in FY24 respectively. The actual expenditure in telecom and Housing & Urban Affairs Ministry has decreased from INR 84,496.26 crore to INR 5,184.49 crore, compared to 66% and 47% in FY24, respectively, and there has been a shortfall in fund transfer to states.
Alongside the drop in the Center’s CapEx, the decline in the States’ CapEx (that dropped by about 7% YoY) is equally worrying. The CapEx of about 12 states under review declined to INR 2.22 lakh crore, compared to INR 2.38 lakh crore in the previous year. The Centre’s fiscal support to the States for infrastructure development stood at INR 3.9 trillion in the current fiscal.
The government is expected to miss the 1.5 trillion FY25 CapEx loan target for States under the Special Assistance For Capital Investment Scheme due to inadequate capital expenditure ramping up in FY24. The RBI has raised concerns about the rise in state expenditure on subsidies, with states’ debt exceeding the 20% recommended by the 2017 FRMB Review Committee, and has called for rationalization of these schemes.
The Centre is promoting States to boost foreign capital inflows through an investment charter, ranking them based on ease of access, compliance, land reform, power supply, and law and order. Private sector investments are struggling due to faltering PPP projects and regulatory uncertainty. DFS Secretary Nagaraju suggests increasing private sector participation in infrastructure spending to sustain high growth rates.
RBI study predicts positive investment climate for private sector, with private CapEx set to surge 54% to INR 2.5 lakh crore in FY25. V Anantha Nageswaran predicts private sector investments will rise due to improved corporate financial health and profitability, with Gross Fixed Capital Formation expected to rise from 30.8% to 35% in 5 years.
The central CapEx momentum is likely to continue in FY26. At 3.4% of the GDP, it may be around 12 trillion (against 11.1 trillion in FY25) target, with the April-November 2024 CapEx standing at INR 1.49 trillion, compared to a record INR 2.72 trillion. Land acquisition delays slowed down projects, with actual spend at INR 144841.67 crore. to propel growth amidst falling State spending.
The government’s CapEx is expected to surge by 25% during the October-March fiscal period, with the Centre expected to utilize 95% of it, according to Nagesh Kumar, Monetary Policy Committee Member, and Ajay Seth, Secretary, Department of Economic Affairs.
The government plans to focus on public spending in FY26, with central CapEx momentum expected to continue at 3.4% of GDP. Infrastructure investments are forecasted to double to INR 143 trillion.
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Construction, Infrastructure and Mining
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