CapEx Boost Holds Key to Infra Development in 2025
The significant decline in India's public and private sector Capital Expenditures (CapEx) in 2024 has necessitated a considerable increase in the CapEx in 2025 to give the necessary impetus to infrastructure development.
Vinod Behl

Looking at the CareEdge report, it is a matter of concern that in the first half of FY25, the central CapEx declined by 15.4% and state CapEx shrank by 10.5%. The Centre achieved only 37% of its budgeted CapEx target during April-September 2024 while 20 states collectively achieved only 28% of the target. As such, the Centre has an uphill task of incurring CapEx of INR 1.3 lakh crore per month during November 2024 - March 2025 to meet the FY25 budget target of 11.11 lakh crore. Aditi Nayar, Chief Economist, ICRA, believes that the target is likely to be missed by 1 lakh crore in the current fiscal.
The highway CapEx has seen a sharp decline, with the Centre achieving only 55% of the CapEx target with just 3 months to go for the end of the current fiscal. According to the Road Ministry data, the April-November 2024 CapEx stood at INR 1.49 trillion against a record INR 2.72 trillion allocated in the Budget for completing at least 13,000 km of highways. Land acquisition delays slowed down many greenfield and brownfield projects. The FY25 Budget estimate for the road sector was INR 2,72,241.5 crore while actual spend has been to the tune of INR 144841.67 crore - 53% of the Budget estimate in FY25 against 66% in FY24.

For Railways, against the Budget estimate capital outlay of INR 25,200 crore, the actual expenditure stood at INR 15,963.63 crore - 62% of the Budget estimate in FY25 against 65% in FY24. In Defence Services, against the capital outlay Budget estimate of INR 1,72,000 crore, the actual expenditure stood at INR 61,569.91 crore - 36% of the Budget estimate in FY25 against 43% in FY24.
In telecom, against INR 84,496.26 crore, the actual expenditure is INR 5,184.49 crore - merely 6% of the Budget estimate in FY25 against 66% in FY 24. In the Housing & Urban Affairs Ministry, against INR 28,628.62 crore, the actual expenditure has been INR 12,967 crore - 45% of the Budget estimate in FY25 against 47% in FY24.
There has been shortfall in fund transfer to states as well. Against a Budget estimate of INR 1,62,408.88 crore, actual spending stood at INR 52,060.07 crore - just 32% of the Budget estimate in FY25 against 48% in FY24.
Alongside the drop in the Center's CapEx, the decline in the States' CapEx (that dropped by about 7% YoY) is equally worrying. The CapEx of about 12 states under review declined to INR 2.22 lakh crore, compared to INR 2.38 lakh crore in the previous year. The Centre's fiscal support to the States for infrastructure development stood at INR 3.9 trillion in the current fiscal.
The government is likely to miss the 1.5 trillion FY25 CapEx loan target for the States under the Special Assistance For Capital Investment Scheme for ramping up capital expenditure. According to the Finance Ministry, the Union Government released INR 50,571.41 crore to the States during the first 8 months of FY25. In FY24, the States lost about INR 45,000 crore, utilising only INR 1.05 lakh crore of loans against the Budget estimate of INR 1.5 lakh crore.
It is equally significant to mention that RBI, in its latest report, has expressed concern on the sharp rise in their expenditure on various subsidies. States' debt in March 2024 stood at 28.5% of the GDP, well above the level of 20% recommended by the Fiscal Responsibility & Budget Management (FRMB) Review Committee 2017. RBI called for rationalising State subsidies and centrally sponsored schemes so that such spending does not adversely impact more productive expenditure on development.
The Centre is pushing States to boost foreign capital inflows. Niti Aayog is preparing an investment charter for States whose ranking will be done on the parameters of ease of access, minimising compliances, reforming land and building norms, and improving power supply and law and order, as better governance helps attract more foreign capital for development and growth.
Private sector investments are struggling as Private Participation in Infrastructure (PPI) is well below the 2008-12 levels due to faltering PPP projects and regulatory uncertainty. According to M Nagaraju, Secretary Department of Financial Services (DFS), the private sector needs to increase its participation in infrastructure spending as India needs to spend 8-10% of the GDP on infrastructure for sustaining high single digit growth rate over the next 20 years.
A RBI study suggests a positive investment climate for the private sector, supported by improved corporate earnings and profits, optimistic business sentiment, facilitating enhanced private sector investments in 2025 and beyond. As per this study, private CapEx is set to surge 54% to INR 2.5 lakh crore in FY25.
According to Chief Economic Advisor, V Anantha Nageswaran, private sector investments will continue to rise amidst improved financial health and profitability of corporates, and the Gross Fixed Capital Formation (GFCF) is set to rise from 30.8% to 35% in the next 5 years. Harsh Vardhan Agarwal, President, FICCI, says that corporate India is in a sweet spot to scale up CapEx as companies' balance sheets have become deleveraged.
Meanwhile, CII has sought a policy reform in the private sector lending (PSL) framework by including emerging sectors like digital infra and innovative manufacturing, as Development Finance Institutions (DFIs) have earmarked specific sectors for financing.
For government CapEx too, there is a positive outlook. Says Nagesh Kumar, Member, Monetary Policy Committee, "The government CapEx, which saw a squeeze in the first quarter of FY25, began to revive in the second quarter and should gain in the third and fourth quarters." According to Jeffries, the Government's CapEx is expected to surge by 25% during the October-March period of the current fiscal. Ajay Seth, Secretary, Department of Economic Affairs, has expressed confidence that the Centre is expected to utilize about INR 10.55 trillion (95%) of the CapEx in the current fiscal.
According to Finance Ministry's Mid-Year Review document, the government's focus during FY26 will be on public spending. The central CapEx momentum is likely to continue in FY26. At 3.4% of the GDP, it may be around 12 trillion (against 11.1 trillion in FY25) to propel growth amidst falling State spending. Crisil forecasts that infrastructure investments (public and private) will more than double to INR 143 trillion, ending March 2030.