Synopsis
On February 1, the Finance Minister, Nirmala Sitharaman, announced an allocation of ₹11.21 lakh crore for capital expenditure in FY 2025-26, focusing on significant infrastructure projects across highways, ports, railways, and power sectors, reflecting a 10.2% increase from the previous year.Key Takeaways
- Capital expenditure for FY 2025-26 set at Rs 11.21 lakh crore.
- 10.2% increase from Rs 10.18 lakh crore in FY 2024-25.
- Highway investments significantly boost GDP.
- National Highway Authority's spending up by 20% in 2023-24.
- Highway development enhances household incomes and reduces transportation costs.
New Delhi, Feb 1 (NationPress) The Finance Minister, Nirmala Sitharaman, has confirmed the continuation of substantial capital expenditure aimed at significant infrastructure initiatives in the highways, ports, railways, and power sectors. The Budget for 2025-26 allocates Rs 11.21 lakh crore, marking a 10.2% increase from the Rs 10.18 lakh crore that was utilized for capital expenditure in the previous fiscal year.
This amount stands at a modest 0.9% higher than the Budget Estimate for 2024-25, which was set at Rs 11.11 lakh crore and represented a significant rise over the capital expenditure for 2023-24. Due to the Lok Sabha elections followed by Assembly elections in states like Maharashtra, the complete allocation of Rs 11.11 lakh crore could not be expended during the current financial year.
Sitharaman suggested a reduction of the capital expenditure target to Rs 10.18 lakh crore from Rs 11.11 lakh crore for this fiscal year.
The capital expenditure remains at a robust level to stimulate growth, which should be considered against a high base, according to a senior official.
This official emphasized that the capital expenditure has been elevated even as the government adheres to a fiscal consolidation path, reducing the fiscal deficit target to 4.4% of GDP for 2025-26 from 4.8% in 2024-25.
The government consistently prioritizes a high capital expenditure level, as investments in significant infrastructure projects enhance economic growth and have a multiplier effect, creating additional jobs and income.
Investments in India’s highways sector have resulted in more than a threefold increase in the nation’s GDP, attributable to the multiplier effect stemming from job and income generation, as per an IIM Bangalore study.
The research indicates that each unit of expenditure on highway construction contributes to a 3.21-unit increase in the country's Gross Domestic Product (GDP).
The National Highways Authority of India allocated a record Rs 2.07 lakh crore for national highway construction in 2023-24, reflecting a 20% increase compared to Rs 1.73 lakh crore in 2022-23 and Rs 1.72 lakh crore in 2021-22.
The highways allocation in the 2025-26 budget remains fixed at Rs 2.72 lakh crore, consistent with the previous year.
The IIM study, covering the period from 2013 to 2022, reveals that national highway development has led to a 9% increase in household incomes, a 6% rise in household expenditure, and a 10.4% surge in car sales.
Furthermore, it notes that highway development has resulted in nearly a 3% reduction in transportation costs between factories and suppliers of raw materials, and a 1.33% decrease in costs between factories and retail customers, indicating improved supply chain efficiency.
The study highlights that new highways have significantly benefited the agricultural sector and MSMEs (micro, small, and medium enterprises), which play a crucial role in employment across the nation.
According to official statistics, the length of India’s National Highway network has increased by 60% over the last decade, rising from 91,287 km in 2014 to 146,195 km in 2024, making it the second largest road network globally.
