FY26 Capex Push: Roads, Railways, Defence in Lead
India’s capital-spending push is off to a strong start in FY26. By the end of September, the central government had spent 52% of its full-year capital estimate, with total capex in H1 rising about 40% year-on-year to ₹5.8 trillion. The ministries of Road Transport & Highways and Railways were the busiest, spending 63% and 57% of their respective Budget Estimates (BE) in the first half, while the Defence ministry has already used more than half of its capital allocation.
Investors now ask: Does this capex tempo mark a durable re-acceleration of India’s growth engine, or is it a front-loaded burst that will complicate fiscal optics later?
What’s Driving The Surge, And How Big Is It?
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Government capex in Apr–Sep FY26 stood at ~₹5.8 trillion, about 52% of FY26 BE, according to Controller General of Accounts (CGA) data. That compares with a much lower take-up in prior years and reflects concentrated spending by infrastructure ministries.
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Road and rail ministries together recorded historic H1 disbursements. It has been flagged over ₹3.1 lakh crore of capex from these two ministries in H1 alone, signalling heavy programme execution on highways, expressways, station modernisation, and network electrification.
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Defence capital outlay is also moving fast. The Ministry of Defence had utilised ₹92,211.44 crore (≈51.23%) of an allocated ₹1.8 lakh crore by end-September, evidence of active procurement, platform buy-outs, and capital projects.
These headline figures matter because capital spending is a direct lever for construction, engineering, materials, heavy equipment, and services firms, sectors that typically see revenue and order-book expansion when public capex accelerates.
Which Programmes are the Action Centres?
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Roads: NHAI and the Ministry of Road Transport & Highways remain the largest execution engines. NHAI plans to bid out a large portfolio of projects in FY26, several reports cite tens of thousands of kilometres and project pipelines worth several lakh crore, keeping order books full for EPC contractors, cement, and asphalt suppliers.
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Railways: Investment is directed at network electrification, dedicated freight corridors, passenger amenity upgrades, and metro/urban rail projects, all of which boost demand for signalling, traction equipment, and civil contractors. Railways’ faster-than-average capex absorption (57% of BE in H1) shows project execution has picked up pace.
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Defence: The MoD’s heavy H1 take-up reflects payments for capital acquisitions, indigenisation programmes (DRDO, DDP), shipbuilding, and aircraft procurement. Private defence-manufacturing and aerospace suppliers stand to see order windows widen as procurement converts into vendor receipts.
What Will Determine the Next Phase for Investors?
Risks, Constraints, And What to Monitor
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Supply-chain and input pressure: Rapid deployment can create bottlenecks. Cement, rebar, skilled labour, and heavy equipment could face price/availability stress, squeezing contractor margins. To minimise the risks, track commodity price moves and tender bid premiums continuously.
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State vs centre execution: The budget includes incentives and loan windows for states; capex success depends on state project approvals and matching contributions; uneven state execution could bottleneck national targets.
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Defence procurement timelines: While the MoD’s spend rate is high, complex procurements (ships, fighters) have long delivery horizons; investors need to separate immediate supplier receipts from multi-year programme economics.
Three Concrete Data Points Investors Should Watch Next
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Monthly CGA capex bulletin, to see whether H2 runs down or picks up; a sustained >90% annualised run-rate implies full execution.
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NHAI bidding calendar and award pipeline, to watch announced project tenders and model mix (EPC vs HAM vs TOT) to anticipate contractor revenue.
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MoD vendor disclosures and offset orders, a few early signs that defence suppliers are securing firm contracts, point to near-term revenue conversion.
Conclusion
Roads, rail, and defence are carrying the FY26 capex baton; they have converted budgetary intent into visible spending and order pipelines. For investors, the opportunity is tangible: EPC contractors, materials suppliers, signalling/electrification OEMs, and defence vendors are first-order beneficiaries.
The critical question remains: Is this a sustainable capex upswing that will feed multi-year earnings growth, or a concentrated H1 sprint that risks leaving H2 thin and exposing companies to execution and input-cost shocks? (Business Standard)
References
Business Standard
Economic Times
Press Information Bureau
TaxTMI
India Budget
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