Key Points

Centre has utilised nearly 39 per cent of its budgeted capex and states have spent 21 per cent, the report from Emkay Global Financial Services said.

Despite the headline numbers appearing inflated due to base effects and sector-specific anomalies, Emkay Research noted that the “core capex,” after adjusting for one-off items, has also posted a robust 16 per cent increase, indicating sustained investment activity across key sectors.

The report highlighted that FY26 marked a shift towards frontloaded expenditure compared to FY25, when capex was backloaded due to the general elections.

This allowed for the full-year target to be met, despite potential weaker spending later, the report showed.

"In five months of FY26, the Centre’s capital outlay has grown sharply, implying that even if the remaining months record an 8 per cent contraction, the government would still achieve its budgeted growth of 6.6 per cent," the report noted.

Emkay Research cautioned that the Centre’s capex expansion is boosted by extraordinary items such as the telecom sector outlay—primarily comprising equity infusions into BSNL and funding for BharatNet—which surged over 722 per cent year-on-year to Rs 179 billion.

Further, the Rs 500 billion advance to the Food Corporation of India represents a major portion of the Centre’s capex expansion. Moreover, loans extended to states have grown substantially and now constitute about 20 per cent of the Centre’s capex, compared with less than 10 per cent in FY22.

Even when adjusted for these outliers, “core sectors like defence and transport are showing genuine capex traction, which will be crucial for sustaining India’s investment-led growth narrative,” said Madhavi Arora, Lead Economist, Emkay Global Financial Services.

Defence spending has risen by 54 per cent year-on-year, railways by 9 per cent, and roads and highways by 11 per cent, while sectors such as housing and urban infrastructure continue to lag behind.

- IANS