Budget 2026: Declining Trend In Union’s Capital Expenditure Against The Budget Estimates Continues This Year As Well

By Krishnanand

The Union Government’s focus on increasing the capital expenditure to shore up the economy by building more highways, ports and railways does not seem to be doing well, at least not as well, as has been estimated by the finance minister Nirmala Sitharaman over the years as the actual estimates or revised estimates for the last three years showed that actual expenditure or revised expenditure for the capital sector has always been lower than the budget estimates for that year, showed the latest budget data tabled in the Parliament on Sunday (Feb 1).

The latest official data showed that, as per the revised estimates, the overall expenditure of the Union Government would decline by over Rs 1 lakh crore (Rs 1,00,503 crores), from the budget estimates (BE) for the FY 2025-26, from Rs 50.65 lakh crores (Rs 50,65,345 crores) to Rs 49.65 lakh crores (Rs 49,64,842 crores).

On the face of it, it appears as a marginal decline of just 2.02 per cent in the overall budget estimates from the budget estimates presented by the finance minister for the current financial year.

However, a closer scrutiny reveals that the decrease in the capital expenditure alone accounts for nearly one-fourth of the overall decline in the budgeted expenditure of the Union government for the current financial year.

The Union Government has been steadily increasing its capital expenditure to build more highways, ports, and airports, laying more railway lines to shore up the economy and create employment after the outbreak of the COVID-19 global pandemic, as the private sector had become risk-averse due to the outbreak of the deadly virus in early 2020.

Talking about the Union Government’s push for the infrastructure sector, the finance minister Sunday said: “Under our first kartavya to accelerate and sustain economic growth, I propose interventions in six areas: Scaling up manufacturing in 7 strategic and frontier sectors; Rejuvenating legacy industrial sectors; Creating Champion MSMEs; Delivering a powerful push to Infrastructure; Ensuring long-term energy security and stability; and Developing City Economic Regions.”

Actual Capital Expenditure Lags Behind Budget Estimates

However, the revised estimates released Sunday by the finance minister Sitharaman showed that despite the talk of giving a powerful push to the infrastructure sector, the capital expenditure would decline to little over Rs 10.95 lakh crore as against the budget estimate of over Rs 11.21 lakh crores for the year. The figure of Rs 10.95 lakh crores also includes the projected capital expenditure for the remaining two months of this fiscal – February and March 2026. Actual capital expenditure for the fiscal year 2025-26 would be known in the Union Budget presented next year.

This is a decline of Rs 25,335 crore in absolute terms or a decline of 2.26 per cent from the budget estimates for the capital expenditure for the current financial year.

This is not the first year that the capital expenditure of the Union Government has declined from the budget estimates. An analysis of the budget data of the last three budgets showed that this trend has been ongoing in all three budgets.

For example, for FY 2023-24, for the first time in history, the Union Government allocated over Rs 10 lakh crore for capital expenditure for the financial year in the regular budget presented after the 2024 general elections. However, the actual capital expenditure was Rs 9.5 lakh crores (Rs 9,49,195 crores), a decline of over Rs 50,000 crores in capital expenditure from the budget estimates for the year.

Similarly, for the financial year 2024-25, the finance minister allocated a record over Rs 11 lakh crores (Rs 11,11,111 crores) for the capital expenditure but the latest official numbers given in the Sunday's budget showed that the actual capital expenditure for that financial year declined to Rs 10.52 lakh crores (Rs 10,51,953 crores), again a decline of over Rs 59,000 crores (Rs 59,158 crores) from the budget estimates for that year.

For the current financial year, the finance minister Sitharaman had marginally increased the budget allocation for capital expenditure from Rs 11.11 lakh crores to Rs 11.21 lakh crores, but the revised estimates presented by her on Sunday showed that the capital expenditure for the current fiscal would be below Rs 11 lakh crores.

Maintaining the trend of increasing the budget allocation for the capital sector, Finance Minister Nirmala Sitharaman has once again allocated a record Rs 12.22 lakh (Rs 12,21,821 crores) for the next financial year, from April 2026 to March 2027 period.

Thrust On Diversifying Infrastructure Financing

Talking about the need to diversify infrastructure financing in the country, the Economic Survey for the year 2025-26 said: India’s infrastructure financing landscape is undergoing a change and shifting from a historical dependence on bank credit toward a diversified ecosystem of alternative financing vehicles and capital market instruments.

“This evolving landscape has been further strengthened by the growing role of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs), which are enabling long-term institutional capital to participate in infrastructure assets,” it said.