The Centre’s FY27 capex is firmly on track with no restrictions on departments despite fiscal headwinds from global uncertainties, sources said.

“Capex is going on well. We have not restricted anything,” a senior official told FE.

For FY27, the Centre has budgeted capital expenditure to rise 14.3% on year to Rs 12.22 lakh crore. Effective capital expenditure, which includes grants-in-aid to states for asset creation, is projected to be Rs 17.1 lakh crore in FY27.

In FY26, the Centre achieved around Rs 10.7 lakh crore, or 98%, of its revised capital expenditure target of Rs 10.96 lakh crore for the year.

Railways and NHAI

Like in recent years, the Centre’s capex push will be led by the Railway Board and the National Highways Authority of India (NHAI), which together accounted for 37% of total capital expenditure in FY27. The budgetary support to these departmental arms is around Rs 4.5 lakh crore in FY27 and are leading the capex so far in FY27.

Capex by the Railway Board shot up 56.9% on-year to Rs 97,160 crore in Q1FY27 while the capex by the NHAI rose 27% to Rs 45,130 crore in Q1FY27.

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For the past two years, the Centre’s capex has remained around 3% of GDP, considered an ideal level under fiscal management norms, lending support to economic growth.

Fiscal Consolidation

The fiscal consolidation path has largely been budgeted through containment of revenue expenditure at 10.5% of GDP in FY27, down from 10.8% in FY26 RE, while maintaining capital expenditure at 3.1% of GDP. The Centre’s capital expenditure as a share of GDP has risen sharply from 1.7% in FY20. Including capital grants to states, it is estimated at 3.9% in FY26 RE.

During April-May of FY26, for which official data is available, the government’s capital expenditure grew around 14% on-year to Rs 2.51 lakh crore.

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The government is likely to do some rebalancing in the revenue expenditure depending on the implementation of schemes and may provide additional funds needed for sectors impacted by the US-Iran war. Given savings expected in many centrally sponsored schemes, the government may rein in fiscal deficit around the budget target of 4.3% of GDP.