Budget 2026: Record Capex Allocation, But Economists Flag Demand & Private Investment Challenges

• Finance Minister Nirmala Sitharaman announced a record public capital expenditure (capex) of Rs 12.22 lakh crore for FY27, a 9-10% increase from FY26, aiming to sustain infrastructure momentum.
• The capex allocation, equivalent to 4.4% of GDP, is described as the highest in at least a decade, reflecting the government's strategy to drive growth through public investment.
• Economists like Indranil Pan (YES BANK) see continuity in reform focus, with increased outlays for waterways, high-speed rail, electronics manufacturing, and support for Tier-2/3 cities.
• While fiscal consolidation is noted by Upasna Bhardwaj (Kotak Mahindra Bank), concerns arise over higher-than-expected gross borrowing (Rs 17.2 trillion) potentially impacting bond markets.
• Jayati Ghosh critically argues that low mass consumption demand and wage incomes hinder private investment, suggesting a need for more social spending and support for smaller enterprises over solely infrastructure-led growth.

Why It Matters: Budget 2026 features record capex for growth, but economists debate its effectiveness without addressing demand and private investment.