India’s public and private sector Capital Expenditures experienced a significant decline in 2024, necessitating a substantial increase in 2025 to stimulate infrastructure development. 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 decreased from INR 84,496.26 crore to INR 5,184.49 crore and 47%, respectively, compared to the Budget estimate.
The actual spending for states was only 32% of the Budget estimate in FY25, compared to 48% in FY24, indicating a shortfall in fund transfer. The Centre’s CapEx and the States’ CapEx have both declined by about 7% YoY, causing concern for infrastructure development, with the Centre’s fiscal support standing at INR 3.9 trillion.
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 INR 84,496.26 crore to INR 5,184.49 crore states’ debt exceeding the 20% recommended by the 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.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 double to INR 143 trillion.
CapEx Boost Holds Key to Infra Development
A robust increase in capital expenditure (CapEx) is essential for driving infrastructure growth, fostering economic expansion, and enhancing long-term productivity. Increased public and private investments in roads, railways, power, and urban infrastructure create jobs, improve connectivity, and attract further investment.
Government-led CapEx, particularly in large-scale projects, has a multiplier effect on the economy, stimulating demand across industries such as steel, cement, and construction. Private sector participation, supported by policy incentives and financing reforms, can further accelerate infrastructure development.
Timely execution, efficient fund allocation, and innovative financing models, including public-private partnerships (PPPs), are critical for maximizing CapEx benefits. With India targeting a $5 trillion economy, sustained infrastructure investment will be a key driver.
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Construction, Infrastructure and Mining
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