Govt plans to stick to budgeted capex, exit non-strategic areas

The government will stick to its planned capital expenditure in FY27 to sustain growth momentum despite global uncertainties, while aiming to gradually exit non-strategic areas to create more room for the private sector to expand, senior officials said on Friday.


The Centre has budgeted FY27 capital spending at Rs 12.22 lakh crore, up nearly 9% from a year earlier. Its capex outlay has risen sharply from Rs 2 lakh crore in FY15.



Expenditure secretary V Vualnam acknowledged potential fiscal pressures from disruptions linked to the West Asia war but pledged uninterrupted funding for priority sectors, such as urban infrastructure, railways, shipping and ports. He also indicated a renewed focus on the quality of spending and government staff performance.


Department of Investment and Public Asset Management (DIPAM) secretary Arunish Chawla reiterated the government's push to enable the private sector to realise its full potential, adding that public enterprises will continue to operate and prosper in strategic sectors linked to public goods and supply chain security.

"They (strategic public enterprises) will also go to capital markets, acquire the market discipline and share the wealth with ordinary investors, which is what is happening," Chawla said.

Also Read: West Asia conflict may trigger $800 bn capex boost for India, but oil and fertiliser risks remain: Morgan Stanley

Both the secretaries were speaking at the ICPP growth conference organised by Ashoka University in the national capital.

Challenging times

Vualnam cautioned that tax buoyancy could be affected by recent cuts in excise duty on petrol and diesel, as well as reductions in import duties on key manufacturing inputs announced in late March and early April.

Also Read: FY27 capex growth of states pegged at 8–10%: report

"The next few months, the next quarter and the coming year are indeed very difficult to envisage, lots of possible stress points," he said.

"(Still) The capex would really be a priority item, which we would like to preserve and ensure that it continues at the budgeted level," Vualnam said.

He said India's fiscal prudence over the past decade positions it well to navigate uncertainties, with the government taking a "proactive" and agile approach to emerging risks. Flagging risks from the West Asia conflict, he said India imports about 60% of its LPG requirement, of which around 90% transits through the Strait of Hormuz.

Priority areas

Chawla outlined the need for stronger interventions in seven areas to address external headwinds and support growth. These include value-added agriculture, strategic manufacturing depth, research & development (R&D), public capex, risk capital mobilisation, health and education, and sustainable economy.

"We have the potential, and if we get the basics right (in these areas), we can solve a number of our problems," he said.

He added that gains in manufacturing value chains in recent years need to be deepened further to boost growth and job creation. Elevated public capex has helped crowd in private investment and generate construction jobs, absorbing surplus farm labour, he said.

Both officials stressed the need to increase research and development spending. India currently spends about 0.6% of GDP on R&D, which Vualnam said is inadequate for sustained progress.

Better-designed regulation, developed bond market

Financial services secretary M Nagaraju said a high-level committee on banking for Viksit Bharat, announced in the budget, will review the sector to make it more efficient, inclusive and aligned with India's growth needs while preserving financial stability.

"We will also likely examine intermediation cost, balance sheet constraints in banks and areas where regulatory and institution can improve the flow of credit, the entities will strengthen the system, not to dilute oversight," he said.

Nagaraju added that deepening the bond market will require coordinated action across regulators and the government. "The supply side needs to develop better secondary market liquidity, lower transaction friction and greater coherence in how similar instruments are treated across different regulatory frameworks. The bond, the currency and the derivatives markets need to work together effectively," he said, adding that the financial system must efficiently channel private savings into productive use.