Budget 2026: Record Capex Allocation, But Economists Flag Demand & Private Investment Challenges
India
M
Moneycontrol•01-02-2026, 17:04
Budget 2026: Record Capex Allocation, But Economists Flag Demand & Private Investment Challenges
- •Finance Minister Nirmala Sitharaman announced a record public capital expenditure (capex) of Rs 12.22 lakh crore for FY27, a 9-10% increase from FY26, aiming to sustain infrastructure momentum.
- •The capex allocation, equivalent to 4.4% of GDP, is described as the highest in at least a decade, reflecting the government's strategy to drive growth through public investment.
- •Economists like Indranil Pan (YES BANK) see continuity in reform focus, with increased outlays for waterways, high-speed rail, electronics manufacturing, and support for Tier-2/3 cities.
- •While fiscal consolidation is noted by Upasna Bhardwaj (Kotak Mahindra Bank), concerns arise over higher-than-expected gross borrowing (Rs 17.2 trillion) potentially impacting bond markets.
- •Jayati Ghosh critically argues that low mass consumption demand and wage incomes hinder private investment, suggesting a need for more social spending and support for smaller enterprises over solely infrastructure-led growth.
Why It Matters: Budget 2026 features record capex for growth, but economists debate its effectiveness without addressing demand and private investment.
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