New Delhi [India], January 5 (ANI): The Union Government’s fiscal strategy for financial year (FY) 2026 will prioritise capital expenditure (Capex), with a major allocation expected to range between 16-20 per cent, from its revised estimates of 90 per cent of FY25 Budgeted Estimates (BE), stated JM Financial in its latest report.
In its report titled 2025 Macro Outlook, the financial services firm stated that the government is likely to devote its resources on sectors such as Railways, Defence, and Roads, with these three ministries expected to account for around 63 per cent of total capex in FY25.
The move is targeted at boosting infrastructure activities while managing long-term fiscal health, the report added.
In 2024, the central government focused primarily on meeting the fiscal consolidation targets.
While India’s fiscal consolidation journey in FY24 involved tight controls on expenditure, including a significant slowdown in capex, the post-election period saw corrective actions being considered by the government to accelerate spending.
This was crucial as the government recognized the need for balanced fiscal management, especially given the economic impact of increased cash transfer schemes in several states.
“The government is likely to continue its focus on fiscal consolidation, and it is highly likely that the FY26 target of 4.5 per cent will be achieved comfortably,” the report added.
The capital expenditure (capex) run rate during April-November 2024 was notably weaker, reaching just 46 per cent of the FY25 Budgeted Estimate, potentially falling short by around 30 per cent by the end of the fiscal year, the report added.
The capex for the fiscal year 2024-25 of the Government of India is Rs 11.11 lakh crore, an 11.1 per cent increase from its previous year.
The report, however, added that Capex is likely to fall short by 10 per cent of the budgeted target in FY25, while allocation for the next fiscal would be optically appealing.
The report added that the central government is on track to meet its revenue collection targets, with strong tax receipts contributing to fiscal stability.
“We believe the government will stick to its fiscal consolidation path,” the report added.
The report further added that despite the setbacks, there are signs of recovery, with the government contemplating the relaxation of quarterly spending limits.
Looking ahead, as per the report, the efforts of the government are aligned with long-term fiscal goals of reducing public debt as a percentage of GDP.
It will also ensure that sovereign bond yields remain stable, in the range of 6.5-6.8 per cent during 2025, as per the report. (ANI)
