Government likely to target 10% capex growth in the budget, says L&T CFO
The chief financial officer of a leading infrastructure and engineering firm has signalled expectations that the government will aim for around 10% growth in capital expenditure (capex) in the upcoming budget. Such a move would reinforce the authorities’ focus on investment-led growth and could shape fiscal priorities for the year ahead.
Why a 10% capex push matters
Capital spending by the government is closely watched because it directly supports infrastructure projects, creates jobs and can stimulate private sector investment. A targeted 10% increase in capex suggests a deliberate effort to accelerate public works and long-term projects rather than short-term consumption boosts.
- Job creation: Higher capex typically translates into more construction and engineering activity, which supports employment across multiple skill levels.
- Multiplier effect: Infrastructure spending often has a larger economic multiplier than other types of spending, driving demand for materials, transport and services.
- Private investment crowding-in: Visible and sustained public investment can improve business confidence and encourage private firms to commit to expansion plans.
Sectors most likely to benefit
A capex emphasis would disproportionately help sectors linked to physical infrastructure and project execution. Key beneficiaries could include:
- Transport and logistics: Roads, highways, ports and rail projects would see increased allocation, boosting demand for contractors and logistics services.
- Power and renewables: Investment in transmission lines, grid upgrades and renewable energy projects could accelerate the energy transition and improve supply reliability.
- Urban infrastructure: Water supply, sanitation, metro projects and urban renewal programs typically require sizable capital outlays.
- Industrial and manufacturing facilities: Investment corridors, industrial parks and common infrastructure would support manufacturing competitiveness.
Macro implications and fiscal considerations
Raising capex by 10% will raise questions about how the additional spending is financed and its impact on the fiscal deficit. There are a few ways policymakers could balance these goals:
- Higher borrowing: Increased public investment could be funded by modestly higher market borrowings, which might put upward pressure on yields in the short term.
- Asset monetisation and PPP: Governments can reduce the incremental fiscal burden by monetising existing assets or using public–private partnership structures to attract private capital.
- Reallocation: Shifting resources from revenue expenditure to capex would prioritise long-term productivity without markedly increasing overall spending.
Well-designed capex can raise the economy’s supply capacity over time, improving growth prospects and tax revenues — and thereby easing fiscal pressures in the medium term.
Execution risks and what to watch
Commitment to higher capex is only the first step. Effective project implementation is crucial to realising the intended benefits:
- Clearances and approvals: Faster environmental, land and statutory clearances reduce delays and cost overruns.
- Project planning and monitoring: Strong procurement practices and real-time monitoring help keep projects on schedule and within budget.
- Supply chain readiness: Timely availability of materials, equipment and skilled labour will be essential to avoid inflationary pressures.
Implications for businesses and investors
For construction and engineering firms, a credible increase in government capex can boost order books and revenue visibility. Suppliers of steel, cement, electrical equipment and heavy machinery could see sustained demand. For investors, the budget signal may tilt preferences toward cyclical sectors tied to infrastructure and industrial activity.
Bond market participants will watch the government’s financing plan closely. If capex growth is funded efficiently through a mix of monetisation, targeted borrowing and better fiscal allocation, market reaction may be muted. Conversely, unclear funding sources could trigger volatility in interest rates.
Bottom line
An expected 10% rise in government capex would reflect a continued emphasis on building long-term economic capacity. While the exact budget details will determine the pace and distribution of spending, such a move would be broadly positive for infrastructure-led growth — provided execution, financing and regulatory bottlenecks are managed effectively. Businesses, suppliers and investors should monitor budget announcements and implementation plans to assess specific opportunities and risks.