From roads and railways to factories and digital networks, capex is reshaping India’s infrastructure.
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After a decade of decline from 2011 to 2021, gross capital formation rebounded from 28% of gross domestic product(GDP) in FY21 to 34% in FY24, with Morgan Stanley projecting it could hit 36% by FY27.
Unlike the 2003–2008 boom, which focused on a few sectors, capex now spans 23–24 segments, creating a broader, sustainable growth foundation.
Despite the progress, 2024 faced headwinds. By October, the central government achieved only 42% of its ₹11 lakh crore capex target, its lowest performance in recent years.
This slowdown was partly due to election-related restrictions.
State governments, meanwhile, grappled with challenges stemming from rising welfare spending and stricter enforcement of the 3% fiscal deficit limit. These factors limited room for capital investments, increasing reliance on the central government for driving growth.
Hitting the ₹11 lakh crore capex target requires a sharp 60.5% year-on-year growth.
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Emkay Research expects the central government to meet its target, but states may fall short by 0.5% of GDP, bringing combined capex for FY25 to 4.9%—below the budgeted 5.4%.
Momentum picked up late in the year. Government cash surplus dropped from ₹2.67 lakh crore in April-September FY25 to ₹28,300 crore by November, likely due to a ramp-up in large capex projects.
Since revenue spending is usually steady, this big dip likely points to a ramp up in large, lumpy capex projects. Private capex has been another crucial piece of this puzzle. Data from Emkay Research indicates that after bottoming out at 2.2% of GDP in FY22, it has now started to recover, reaching 2.9% in FY24.
Cleaner corporate balance sheets, with the leverage at over a decade low, along with government initiatives like PLI schemes, robust order book in capital goods sector hint towards an upturn in private capex as well.
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The stage is set for 2025 to deliver on the capex promise. With the central government driving investments and private capex recovering, the year could mark a turning point for India’s growth story.
