The Infra Capex Divide Aligning Public Spending with Private Capex is the Way Forward

Public capex has become a principal engine of infrastructure development and economic growth, sustaining the investment cycle. Yet, private expenditure in infrastructure has remained measured, falling short of expectations. As long-term infrastructure build-out requires stronger private participation, the challenge now is to restore equilibrium between public and private capital flows, ensuring that government spending does not substitute private investment but instead catalyses it at a scale.
Vinod Behl

Intriguingly, private investment is not keeping pace with public capex even when corporate balance sheets are healthy and credit flow has improved amid policy reforms and a favourable economy. Perhaps, this prompted Prime Minister Narendra Modi to call upon the private sector to come forward decisively to invest, as it is critical for the next phase of India's economic transformation.

Public capex soared over the past decade, rising from INR 2 lakh crore in FY 2014-15 to INR 12.2 lakh crore in FY 2026-27. In the 2026-27 budget, the public capex was pegged at INR 12.2 lakh crore, 3.1% of the GDP along with continuous policy support to the states for funding. This, together with capital-linked transfers to states and CPSEs, amounts to 17.15 trillion, which comes to 4.4% of the GDP. The Budget also announced a significant policy initiative of the Infrastructure Risk Guarantee Fund to boost public- private partnerships.

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