Govt to budget record ₹12.5 tn capex in FY25

Robust tax revenue has given the Centre more space to boost spending

- Subhash Narayan & Rhik Kundu

The Union government is likely to boost its capex allocation by 25% to a record ₹12.5 trillion to develop infrastructure projects in the year starting 1 April, building on substantial increases in recent years to spur economic growth, two people with direct knowledge of the matter said.

The government stepped up its capex budget in recent years to improve India's creaking infrastructure, create jobs and accelerate economic growth. It budgeted ₹10 trillion to develop infrastructure in the current fiscal year, marking a 37% increase from the previous year, with growth rates of 24% in FY23 and 40% in FY22.

Buoyant tax collections have given Finance Minister Nirmala Sitharaman more fiscal space to enhance spending on infrastructure. Tax collections have been stronger than expected this year, with total government revenues expected to substantially exceed budgeted estimates amid increased economic activity.

The finance ministry is examining the higher capital spending proposal to boost investments in various infrastructure projects, one of the two people said, requesting anonymity.

With more than 60% of the budgeted capex allocation already spent during the first half of the fiscal, more funds would be needed to complete the larger projects proposed under the government's Vision 2047 programme to achieve developed country status when India celebrates 100 years of freedom from British rule, the person said.