21/04/2026
The Indian government is intensifying its focus on capital expenditure (capex) as it seeks to counterbalance the sluggish pace of private sector investment, which continues to be dampened by global uncertainties, including the economic impact of US tariffs. This renewed emphasis is evident in the early performance of the current fiscal year, where the Centre has already utilized 20% of its annual capex allocation within the first two months—an improvement from 13% during the same period in the previous fiscal. This proactive approach highlights the government’s intent to stimulate economic growth through public infrastructure investment, especially at a time when private industry remains cautious.
Despite this uptick in public spending, private investment continues to lag, hindered by underwhelming capacity utilisation across multiple industries. While certain sectors such as electronics have seen positive momentum—buoyed by the government’s Production-Linked Incentive (PLI) schemes—most industries are not currently operating at full capacity, making fresh capital commitments less attractive or necessary. In particular, industries like automobiles and energy are grappling with the challenges of transitioning to greener technologies. This structural shift has led to a cautious approach from companies, as they await clarity on new standards, technologies, and potential returns on investment before committing substantial capital.
Looking forward, the government has set an ambitious capital expenditure target of ₹11.4 lakh crore for the current fiscal year (FY26), nearly half of which has been designated for the development of roads and railways. This highlights the strategic priority placed on core infrastructure as a driver of long-term economic growth and job creation. Key ministries have already begun executing this vision. The Ministry of Railways has reported spending ₹52,073 crore, or 21% of its Budget Estimate (BE) in April-May FY26, slightly ahead of its pace during the same period in FY25. Similarly, the Ministry of Road Transport and Highways has disbursed ₹59,638.58 crore, accounting for 22% of its BE, an improvement from the 21% disbursed during the corresponding months last year.
To further expedite infrastructure development, the Ministry of Road Transport & Highways plans to implement a new system for ranking states based on the ‘ease of land acquisition.’ This initiative aims to address one of the most significant bottlenecks in highway and expressway construction: securing land. Delays in land acquisition not only slow down pre-construction activities but also derail the overall execution timelines of large infrastructure projects.
India’s economy grew by 6.5% in FY25, and the Reserve Bank of India has projected a similar growth trajectory for FY26. However, sustaining this momentum will depend on the efficient execution of public projects and a revival in private sector investments.
The Confederation of Indian Industry (CII) has identified two critical hurdles affecting the timely implementation of large-scale projects. First, there is a notable shortage of skilled labor, particularly in sectors that require the mobilization of thousands of workers. This workforce gap is resulting in delayed project execution and inefficiencies on the ground. Second, environmental clearances remain a formidable challenge. According to the CII chief, the average time required to obtain environmental approvals has extended to 12 months, significantly impacting the capital deployment cycle. These procedural delays persist even after project announcements, thereby slowing the overall pace of economic development.
In summary, while the government’s strong capex drive is providing a crucial economic cushion, systemic issues such as land acquisition delays, skilled labor shortages, and lengthy environmental approval processes must be addressed to unlock the full potential of public and private investments in India’s growth trajectory.