Union Budget 2026: FM Announces a Record ₹12.2 Lakh Crore for Capex in FY27

In the Union Budget for FY27, Finance Minister Nirmala Sitharaman set capital expenditure at ₹12.2 lakh crore, the highest level recorded so far.  

The Budget was presented in Parliament on February 1 and outlines spending plans for the financial year 2026-27. Reports suggest that the allocation shows a continued focus on public investment. 

Year-on-Year Comparison 

The FY27 capital expenditure figure is higher than the revised estimate of ₹10.9 lakh crore for FY26 and the budgeted amount of ₹11.21 lakh crore in the previous year. The increase works out to roughly 9% over the latest revised estimate.  

Compared with earlier years, the pace of growth has slowed, but overall spending has continued to move upward. 

Share Of GDP Remains Steady 

Capital expenditure is expected to stay at around 3.1% of GDP in FY27, broadly unchanged from FY26. This shows that while allocations are rising in absolute terms, spending relative to the size of the economy is being kept stable. The approach appears aimed at maintaining investment levels alongside fiscal consolidation. 

Effective Capex Shows Sharper Rise 

A larger increase is visible in effective capital expenditure, which includes grants-in-aid given to states for creating capital assets.  

For FY27, effective capex is projected at ₹17.14 lakh crore, compared with ₹14.04 lakh crore in the revised estimate for FY26. As a result, effective capex as a share of GDP is expected to rise from 3.9% to 4.4%. 

Context from Economic Survey 

The focus on capital spending is in line with themes highlighted in the Economic Survey released on January 28. The Survey noted that capital expenditure tends to have longer-lasting effects on incomes and productivity than transfer-based spending. It also pointed to policy and regulatory uncertainty as factors affecting private investment. 

Utilisation Trend in Current Year 

Data released by the Controller General of Accounts shows that capital expenditure during April-December FY26 reached 70.3% of the full-year Budget estimate. This compares with 61.7% utilisation in the same period last year, indicating a quicker pace of spending. 

Read More: Budget 2026: FM Proposes Restructuring of REC and PFC to Strengthen Public Sector Financial Institutions! 

Conclusion 

With ₹12.2 lakh crore allocated for FY27, the Budget keeps capital expenditure at elevated levels. While growth in allocations has moderated, both headline and effective capex figures point to a continued reliance on public investment in the coming year. 

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