In Part I of the special edition of Akhil Vaani on “Union Budget 2026-27", I distilled out 10 macro features of this seemingly “budget without a headline story". To tell the truth, I was not looking at a big bang reform in the budget, given the fact that all the recent reforms including GST 2.0 and new Labour Codes have been rolled outside the budget. Time for the government for the resolute action for the “Reform Express" to chug along is 24X7, 365 days a year.

Having said this, what is the biggest story emerging out of the 2026-27 Union Budget?

Capex, Capex and Capex.

The biggest headline of the budget is a continued push on the capital expenditure. Despite adhering to its commitment of fiscal prudence of bringing down the Fiscal Deficit from 4.4 percent in FY2026 to 4.3 percent in FY2027, the budget has upped the ante on the capital expenditure part from Rs. 11.2 lakh crore in FY2026 to Rs. 12.2 lakh crore in FY2027.

To get a sneak preview of the big picture on the capex front, I step back to the era before the Modi government. The total budget capex in the financial year 2026-27 at 12.2 lakh crore is almost equal to the Union Government’s total capital expenditure from 2004-05 to 2013-14, which was approximately Rs 12.39 lakh crore. This period under the UPA government saw capex as a share of total expenditure declining from around 17% in 2004-05 to about 12% by 2013-14, with actual capex hovering around 9-11% of total spending.

As compared to the 2004-05 to 2013-14 era, the tenure of the Modi government began with a capex of Rs. 2 lakh crore in 2015-16, increasing to Rs 11.2 lakh crore budgeted for 2025-26, marking over a 5-fold increase driven by infrastructure focus post-2014.

The share of capex in total expenditure climbed to 18.6% by 2023-24, the highest in two decades. Significantly, India’s Union Government capex from 2014-15 to 2025-26 totalled approximately Rs 60-65 lakh crore cumulatively (actuals up to FY25 RE plus FY26 BE), marking sustained high capex year by year, the biggest story of the budget.

Make no mistake, the budgeted capex of Rs. 12.20 lakh crore in FY2027 stands at 4.4 percent of the GDP, the highest in at least a decade.

India’s capex surge from 2014-2026 has supported sustained GDP growth averaging 6-7% annually, with a multiplier effect where each Rs 1 crore in public capex generates Rs 2.5 crore in GDP through supply-side boosts like better infrastructure.

High Union Budget capex allocations over the past 12 years have acted as a significant growth multiplier engine, with plausible estimates suggesting an aggregate additional GDP impact in hundreds of trillions of rupees, concentrated through infrastructure, supply chain expansion, and investment crowding-in effects.

Higher capex enhanced productivity via roads, rails, power, and logistics contributing 1-2 percentage points to GDP growth via multipliers and crowding-in private investment, though full effects lag 1-2 years. India’s GDP expanded from $2 trillion in 2014 to over $4 trillion by 2026, partly due to this, with FY26 growth pegged at 7.4 percent and FY26-27 growth projected at 6.8 to 7.2 percent despite unprecedented global headwinds.

While the India capex growth story in last twelve years has acted as a significant growth multiplier engine, it significantly lags behind China in absolute numbers though China’s public infrastructure spending, while slowing from its 2000s peak of 8-10% of GDP, remains higher at around 4.8-5% recently, supported by massive state-led fixed asset investment averaging 40% of GDP total (public-private mix).

India’s capex CAGR (~20-25% nominal) outpaces China’s recent ~5-7% slowdown amid property crisis and debt deleveraging, but absolute scale lags: China’s economy is 4.6x larger, enabling trillions in annual infra vs India’s hundreds of billions.

Clearly, for India to actualise its dream to become a developed Bharat by 2047, the capex story (both public and private sector) must up the ante multiple folds.

It is critical for India to boost execution (target utilisation >90%), raise domestic savings to 35% GDP for self-funded capex, and accelerate private investment via land/labour reforms and single-window clearances.

Having presented the big picture, how do sectoral allocations play out? Here are the........

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