Public spending on capital expenditure (capex) remains a priority due to its strong multiplier effect on economic growth, Finance Minister Nirmala Sitharaman clarified on Saturday in a press briefing following the Union Budget 2025 presentation.
Sitharaman presented her eighth consecutive Union Budget for financial year 2025-26 (FY26), which included key announcements such as income tax reductions for salaried individuals, changes in tax slabs, and major infrastructure projects.
No cut in capital expenditure: FM
During the post-Budget press briefing, Sitharaman emphasised that the government continues to prioritise capex.
“There is no reduction in public spending on capital expenditure. We continue to place emphasis on the multiplier effect that government capex has shown, which has sustained us,” she said.
For FY26, the capital expenditure target has been raised by 10.08 per cent to a record ₹11.21 trillion, highlighting the government’s reliance on infrastructure spending to drive economic growth. However, the capex target for the current fiscal year (FY25) has been revised downward to ₹10.18 trillion from the earlier estimate of ₹11.11 trillion.
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The government is balancing fiscal consolidation with economic expansion, aiming to generate revenue through tax collections and asset monetisation while sustaining high public investment. India’s push for large-scale infrastructure spending is seen as a key strategy in its ambition to become the world’s third-largest economy by 2030.
Tax relief and structural reforms
The Union Budget 2025-26 also introduced income tax reductions for salaried individuals along with changes in tax slabs. Further rationalisation of customs duties has been proposed to simplify tariff structures and enhance competitiveness. Sitharaman added that tax reforms initiated last year would be formalised next week.
“The income tax simplification that I announced in July is already completed, and we shall bring the bill next week… So if we are talking of reform, including taxation, the work is done. This Budget also speaks about rationalisation. Tariffs are being brought down and simplified,” Sitharaman said.
Infrastructure and investment push
Among the major announcements, several infrastructure projects were allocated to Bihar, signalling a focus on regional development. The government will also introduce Jan Vishwas Bill 2.0, aimed at decriminalising over 100 provisions to improve the ease of doing business. Additionally, an Investment-Friendly Index of States will be launched in 2025 to assess state-level business environments and attract investors.
Reiterating the government’s commitment to agricultural self-sufficiency, Sitharaman said: “We aim to become the food basket of the world.”
Growth strategy amid fiscal discipline
While maintaining its focus on large-scale capex investments, the government has moderated overall spending growth to ensure fiscal consolidation. The decision to limit the increase in capex while keeping it at an elevated base reflects a cautious approach, balancing economic expansion with fiscal prudence.
