BUDGET 2025: Capital expenditure rises to Rs 11.2 lakh crore, boost to infra and auto

The Union Budget 2025 has allocated ₹11.2 lakh crore for capital expenditure in FY2026, up from ₹10.2 lakh crore in FY2025. This represents a 10.1% increase compared to the previous year. The government’s focus on fiscal consolidation, while continuing its capex thrust augurs well for the economy, says Ashish Modani, Senior Vice President & Group Head, ICRA Ltd. 

"The Union Budget 2025 has made substantial allocations and introduced several initiatives to boost the infrastructure sector in India. Healthy capital expenditure, focus on transportation and urban development, are expected to support the country's economic growth and development"  Modani remarked. "The successful implementation of these projects will be crucial in achieving the desired outcomes and ensuring sustainable economic growth in the coming years."

The development seems significant considering that a strong thrust to infrastructure investment is crucial for India's economic growth and development. Infrastructure—covering roads, highways, railways, airports, ports, and urban development—acts as the backbone of an economy by enhancing connectivity, reducing logistics costs, and promoting industrial activity. It also helps drive the demand for automobiles, construction equipment and allied products. 

Dheeraj Hinduja, Executive Chairman, Ashok Leyland said, "The budget prioritizes extensive national infrastructure development and accelerates the digitization of the economy. Continuous government investments in infrastructure are set to fuel sustained economic growth. Additionally, the government's strong commitment to green mobility is expected to create new avenues for innovation and growth across the country".

He added that the launch of the National Manufacturing Mission will support the sector by providing crucial policy backing, execution plans, and a governance and monitoring framework. "With strategic investments in skilling, digitization, healthcare, education, agriculture, and electrification, the budget aims to shape India’s economic trajectory in the years ahead.  Furthermore, it reinforces our commitment to clean energy vehicles, contributing to a greener, cleaner future as part of the national mission to achieve net-zero carbon emissions.” Hinduja added. 

Likewise, Girish Wagh, Executive Director, Tata Motors is of the view that the union budget 2025 lays  out a clear roadmap for long-term transformation, driving India closer to its vision of a ‘Viksit Bharat’ with progressive policies and reforms that foster modernization, economic growth, and inclusive development.

"The continued allocation of over Rs. 11 lakh crore in capital expenditure, alongside targeted initiatives to boost consumption, support ‘Make in India’, and promote agricultural growth, is set to create a more dynamic economic environment" Wagh stated, before adding that the removal of basic customs duties on key materials for battery manufacturing is a strategic move to boost domestic EV production, foster a sustainable ecosystem, and drive India's transition to a greener economy. "As infrastructure projects gain momentum and consumption picks up, improved roads, connectivity, and logistics will undoubtedly drive increased demand for freight and commercial transport solutions driven by both domestic demand and broader economic recovery." he added. 

Vinod Aggarwal, MD & CEO, VECV noted that the introduction of the National Manufacturing Mission and the emphasis on Clean Tech Manufacturing, including National Critical Minerals Mission, particularly for EV batteries, motors, controllers, and high-voltage transmission equipment, will provide a significant boost to ‘Make in India’ efforts. The rationalization of custom duties on key raw materials and the reduction of inverted duty structures will also enhance cost-effectiveness in domestic manufacturing. The duty exemption on capital goods for EV battery manufacturing is a welcome step toward accelerating India's electric mobility transition.

 "Furthermore, adjustments in GST rates, incentives for electric vehicle adoption and import duties on components will reshape the industry’s landscape. Increased allocations for infrastructure development, particularly in roads and transportation, will directly fuel demand for commercial vehicles. Additionally, budgetary provisions for working capital support, technology upgradation funds, and easier credit access will play a crucial role in strengthening the MSME ecosystem, ensuring its long-term growth and sustainability" Aggarwal explained. 

Similarly, Mahesh Babu, CEO of SWITCH Mobility stated  that India's FY25-26 budget targets economic growth with a 4.4% fiscal deficit and income tax cuts, including exemptions for individuals earning up to Rs12 lakh boost disposable income, consumer spending will benefit sectors like commercial vehicles with higher logistics demands. "The budget also simplifies duties and taxes to support MSMEs, startups, and entrepreneurship." Babu said. 

According to him, the  exemption of customs duties on lithium-ion batteries and critical minerals such as cobalt, zinc, and lead represents a crucial step in reinforcing India’s electric vehicle (EV) ecosystem.

Sandeep Singh, MD, Tata Hitachi said, " Overall it’s a good budget, focus on infrastructure continues with increase in Capex, urban development and Jal Jeevan Yojana, overall positive. MSME reform is also good for manufacturing." 

Shalabh Chaturvedi, MD, CASE Construction Equipment – India & SAARC stated: The ₹2.87 lakh crore allocation for road transport and highways is a significant investment that aligns with our mission to support and strengthen India's infrastructure growth. 

Deepak Garg, Vice Chairman and Managing Director, SANY India said, "The focus on infrastructure development, including 50 years of interest-free loans and PPP incentives. Also, Rs 10 lakh crore asset monetization plan will significantly boost the construction and heavy machinery sectors. The Rs 1.5 lakh crore allocation will foster growth and investment, while the emphasis on skill development will drive innovation. 

Yatin Gupte, Chairman & Managing Director, Wardwizard Innovations & Mobility Ltd, said, "We welcome the policies stated in Union Budget 2025-26 by the Hon’ble Finance Minister, which gives a strong push towards EV adoption, accelerating the development India’s electric vehicle ecosystem. The reduction in customs duty on lithium and other important raw materials will significantly lower input costs for lithium-ion battery manufacturing, making EVs more affordable to consumers while boosting domestic production. The introduction of a national manufacturing mission for clean tech industries is another commendable move. By strengthening the ecosystem for EV batteries, motors, and controllers, this initiative will accelerate India’s transition to sustainable transportation.

The recognition of MSMEs as the ‘2nd engine’ of economic growth in the Union Budget 2025 will boost sectoral confidence. The fiscal policies stated to support MSMEs will have a multiplier effect on various sectors, including accelerating India’s e-mobility revolution. We are confident that the expanded tax bracket will enhance the purchasing power of the middle class, which will positively impact EV industry in India."

Warren Harris, CEO and MD, Tata Technologies said, "The budget's focus on establishing a National Manufacturing Mission aligns with our goal of engineering in India for 'Make in India' and enhancing the nation's self-reliance in manufacturing. This initiative is poised to attract investments and improve efficiency, positioning Indian companies as globally competitive players."

"The 2025-26 Budget continues the focus on capex spend and puts more money in the hands of the middle income group using tax relief as the means. This will provide a fillip to demand growth and employment, while also being fiscally responsible. 

The budget is also very inclusive as most sections of society and sectors of the economy (including Manufacturing, MSMEs, Agri, Startups, Tourism, Skilling, Training in AI), have been thought of and have been provided support for growth or transformation. FDI in insurance, EoDB with rationalization of import duties & other provisions, the nuclear energy mission for 100GW energy,  India Post as logistics organization leveraging last mile connectivity, and personal income tax changes are some other highlights," Dimitrov Krishnan from Volvo Construction Equipment said.