The small picture

Behind the rise of govt capex are a few subtle trends that need to be examined a little more closely

- RAISINA HILL A K BHATTACHARYA

How should one assess the recently reported rise in the Union government's capital expenditure? Has there really been a sharp uptick in such spending? Of course, the headline numbers, based on data released by the Controller General of Accounts, show that the Centre's capital expenditure has jumped by over 43 per cent to ₹4.31 trillion in AprilAugust 2025, compared to ₹3 trillion in the same period of 2024.

Unsurprisingly, this has been hailed as a major positive development that should help sustain and even enhance growth in the months to come, particularly when the private sector is still showing reluctance to increase investment in new projects. Remember that the government had for the first time in the last five years projected a singledigit growth in capex in 2025-26 to just 6.5 per cent. But the frontloading of capex in the first five months will now provide an expenditure cushion in the remaining seven months of the current year, when it can afford to contract by even about 8 per cent and yet meet the Budget target of ₹11.21 trillion.

In spite of that comfort, however, a closer look at these numbers reveals a mixed picture. Yes, after the Centre's capex in July fell by over 10 per cent, bringing down the overall increase in such expenditure in the first four months of 2025-26 to 33 per cent, the sharp rise in August has improved the outlook. But when you analyse how the 43 per cent rise has been achieved, the enthusiasm shown by most analysts will have to be tempered a bit. Worries over the capacity of the infrastructure sector to absorb increased capital expenditure will not go away.