New Delhi [India], July 8 (ANI): Capital Expenditure, which has witnessed tremors lately due to the market slowdown, is expected to resume on a growing order pipeline of infrastructure Engineering and Construction (E&C) companies.
In the latest report dedicated to analysing the Infrastructure E&C sector, SMIFS Limited, however, added that the progress rate may be slow because of a higher base.
After several years of strong awarding activities, the key sectors within the infrastructure domain have entered a period of muted tendering activities in FY24 and FY25. This slowdown is largely due to cost and time overruns in various underlying schemes, heightened expenditures on numerous welfare initiatives, and disruptions caused by both general and key state elections.
“We anticipate that the capex trend is likely to resume ahead on the growing order pipeline, although the progress rate may slow down on a higher base. Nonetheless, we believe that diversification in terms of geography, sectors, and clientele has become imperative for developers to secure their journey back onto the growth path,” the report added.
India has witnessed significant progress in infrastructure development during the last ten years, which has transformed the economic landscape and enhanced the living standards of its populace. This advancement is largely backed by numerous initiatives introduced by the Government of India aimed at modernising and expanding the country’s infrastructure, recognising its crucial role in stimulating economic growth, creating jobs, and encouraging holistic national development.
The Gross Budgetary Support (GBS) has nearly quadrupled, with a 15 per cent CAGR reported throughout FY16-26BE, reaching Rs15.5 trillion (incl. grants) in the Financial Year 2026 budgetary estimate.
The key sectors that benefitted from this enhancement include roads and highways (increased 9.3x to Rs 2.8 trillion), railways (up 7.2x to Rs2.5 trillion), defence (up 2.3x to Rs 1.9 trillion), housing and urban affairs (increased 70x to 836.9 billion), renewables (from Rs70 mn in FY16 to 245 billion in FY26E), and telecommunications (increased 22x to 518 billion).
Additionally, the GBS (incl. grants) has now risen to 4.2 per cent of the total GDP, in contrast to the 2.5 per cent reported in FY16. Moreover, the share of capex within the overall budget has expanded to 30.6 per cent in FY26BE, rising from 21.5 per cent in FY16.
“This trend indicates a heightened focus on asset creation,” the report added.
Further, the report added, “Given this, we have marked a trend wherein the expansion in GBS typically decelerates as the election year approaches due to a change in priorities, as observed in FY18 and FY19 (election year: 2019) and FY25 (election year: 2024) and then subsequently shows improvement. We predict that this trend will follow suit.”
The government has estimated a capex of Rs 11.2 trillion for the FY 26BE, up 10 per cent year-on-year versus the revised estimate of Rs 10.2 trillion in FY25. (ANI)
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