Growth in GoI’s capex stronger than that of states in 2M FY2027; fiscal risks may lead to spending cuts: The GoI’s capital expenditure increased by a healthy 13.4% to Rs. 2.5 trillion in 2M FY2027 from Rs. 2.2 trillion in 2M FY2026. This was largely led by strong capex by Railways (+42.5%) and Ministry of Road Transport and Highways (MoRTH; +7.5%) to some extent. 

Besides, as per the provisional data for the 22 state governments, the aggregate capital outlay and net lending stood at Rs. 0.7 trillion during 2M FY2027, a tepid 3.8% higher on a YoY basis (+2.8% in Q4 FY2026). Notwithstanding the healthy 14.3% growth in capex targeted for FY2027, risks around fiscal slippage if the West Asia crisis persists, could lead to a paring in the GoI’s discretionary spending.

Source: CMIE, MOSPI, ICRA Research