India’s Finance Minister Nirmala Sitharaman has reassured industry stakeholders that the government’s capital expenditure (capex) plan remains robust, despite concerns regarding potential cuts.
Addressing these worries during a post-budget interaction, she stated that the government's asset-building efforts are ongoing, and as a result, the capex target for the current financial year is 10.2% higher than the previous one.
The Budget for 2025-26 has provisioned for a capital expenditure of about ₹16 lakh crore, including spending by Public Sector Undertakings (PSUs). This is a significant increase compared to the previous year’s allocation.
Specifically, the government has budgeted ₹11.21 lakh crore for its own capital expenditure. The overall effective capital expenditure, which includes core capital outlays and grants to states for creating capital assets, is projected at ₹15.48 lakh crore.
This is up from ₹13.18 lakh crore in the revised estimates for 2024-25.
Sitharaman’s remarks come amid concerns from industry players about the government’s emphasis on consumption boost and fiscal consolidation, which some feared could lead to cuts in capex.
However, she clarified that the government's focus on capital expenditure would not waver. In fact, efforts to facilitate consumption would not come at the expense of key infrastructure spending.
The finance minister emphasised that tax relief measures in the Budget, aimed at boosting consumption, do not signify a reduction in capex allocations.
The government also plans to focus on reducing the debt-to-GDP ratio, with a clear strategy of cutting borrowing and adhering to the fiscal glide path established since July.
Sitharaman assured that these efforts to bring down public debt would not negatively affect any ongoing or future government programmes. This focus on fiscal discipline is intended to make the Indian economy more sustainable in the long run, without sacrificing key developmental goals.
Sitharaman also highlighted ongoing power sector reforms, noting that upcoming programmes in this area would serve dual purposes: they would not only address energy needs but also create jobs. Such initiatives are expected to play a crucial role in driving the country’s economic recovery.
The finance minister also addressed the ongoing reforms in the insurance sector. The government is working to raise the Foreign Direct Investment (FDI) limits in this sector to attract more players.
India’s insurance industry, according to Sitharaman, needs to diversify and expand, which is why encouraging greater participation from global players is vital.
However, the government is also taking steps to safeguard consumers by implementing new regulations and guidelines to protect their interests.
A key highlight of the 2025-26 Union Budget was the significant relief for middle-class taxpayers. Sitharaman pointed out that the income tax exemption limit has been raised from ₹7 lakh to ₹12 lakh. This measure alone will exempt approximately one crore taxpayers from paying income tax.
The government estimates that this move will result in a direct tax revenue loss of around ₹1 lakh crore and an indirect tax revenue loss of ₹2,600 crore.
Nevertheless, the government is hopeful that this tax relief will stimulate the economy, as taxpayers are likely to spend or invest the additional savings in various sectors.
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