Ms. Madhavi Arora, Chief Economist, Emkay Global Financial Services

Capex Budget details

  • Centre’s FY26BE capex (Rs11.2tn) stays at 3.1% of GDP – same as FY25RE, vs the ambitious targets of 3.4%. FY24 saw capex/gdp at 3.2%.
  • Centre’s FY26 capex growth budgeted higher at 10.1% (vs 7.3% for FY25RE but much lower than 17% in FY25BE).

Defence growth seen highest among core sectors amid tepid performance last yr.

Rail and Roads see 0% and -0.1% growth in FY26BE, after meeting their FY25BE targets.

  • New schemes of Dept of Eco affairs again sees massive allocation of Rs417bn in FY26, after heavily undershooting FY25BE allocation of Rs636bn (FY25RE:Rs 91bn only)
  • FY26BE PSU – IEBR capex (ex-FCI) at Rs4.3trn) is 1.1% of GDP – again, same as FY25RE, but higher than FY24 (1.0%). PSU capex growth is taken at 12.9% (vs 10.9% for FY25RE)
  • As a result,Centre + PSU capex/GDP is marginally higher for FY26 (4.3% vs FY25RE: 4.2%) – with higher PSU capex in the Power and Housing sectors driving overall PSU capex growth.
  •  Centre + PSU capex growth is taken mildly higher at 10.8% (vs 9.7% for FY25RE, albeit lower than 15% in FY25BE).
  • We have been arguing combined C+PSU capex/GDP has plateaued at 4.2-4.3% since FY24, amidst revex skewness, limited revenue mobilisation and binding absorptive capacity.

Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution Pvt Ltd

We welcome the Union Budget 2025-26, which presents a strategic roadmap for accelerated economic growth while offering much-needed relief to the middle class. The Finance Minister has introduced progressive tax reforms that are set to increase disposable income, fostering both financial stability and consumer spending.

With the revised income tax slabs and reduced tax rates, a rough estimate suggests that taxpayers could save up to ₹10,000 per month, depending on their income bracket. This significant boost in savings will enable individuals to better manage existing loans and enhance their loan eligibility, making homeownership and other large investments more accessible.

The ripple effect of increased disposable income will be felt across the retail loan industry, as more individuals will have the financial confidence to take on new loans, whether for housing, automobiles, or personal financing needs. This policy move is expected to strengthen the banking and NBFC sector, further driving economic momentum.