Government Infrastructure Expenditure to Drive Economic Growth in 2025-26
India's economic growth in 2025-26 is expected to be driven by government expenditure on major infrastructure projects, including railways, highways, and defense. A report by Prabhudas Lilladher highlights the positive impact on sectors like healthcare, tourism, and manufacturing, with industrial growth and consumer demand also showing significant improvement.
New Delhi: India’s economic growth in the financial year 2025-26 is expected to get a significant boost from the government’s capital expenditure on large-scale infrastructure projects.
According to a report by Prabhudas Lilladher (PL), investments in critical sectors such as highways, railways, power development, and defense will play a pivotal role in driving the country’s growth trajectory in the upcoming fiscal year and beyond.
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The report highlights that sectors such as railways, defense, power, and data centers have already started witnessing an uptick in momentum, with these projects expected to accelerate economic growth in FY26 and the years following.
The substantial allocation of resources to infrastructure is seen as a key factor in stimulating demand and supporting long-term economic expansion.
Government’s Infrastructure Push: Budget Allocation and Future Projections
The government’s commitment to infrastructure development is evident from the massive Rs 11.1 lakh crore allocation in the 2024-25 budget for infrastructure projects. This allocation is expected to be increased in the forthcoming budget for 2025-26, further solidifying the government’s focus on infrastructure as a key growth driver.
By investing heavily in infrastructure, the government is aiming to provide the much-needed impetus to the economy. These investments are expected to not only stimulate demand but also enhance the productivity of critical sectors, laying the foundation for sustainable economic growth in the years to come.
Expected Economic Focus in the 2025-26 Budget
The 2025-26 budget is anticipated to be a crucial one in shaping India’s economic recovery. With inflation easing, the government is expected to focus on growth-driven policies that aim to boost middle-class spending.
This is expected to have a ripple effect across various sectors, particularly those that have been affected by the pandemic and the subsequent economic slowdown.
According to the PL report, sectors such as healthcare, tourism, discretionary consumption, and financialization are poised to benefit from the recovery. These sectors are likely to experience a surge in demand as economic conditions improve and disposable incomes rise, further fueling the overall growth momentum.
Industrial Growth Shows Positive Signs: A Boost for Economic Revival
The economic revival is already visible in the surge in industrial growth. Data released by the Ministry of Statistics on Friday revealed that industrial growth touched a six-month high of 5.2 percent in November 2024, up from 3.5 percent in October of the same year.
This marks a significant improvement compared to the 2.5 percent industrial growth recorded in November 2023, signaling a strong recovery in industrial output.
The growth in the manufacturing sector, which comprises more than three-fourths of the Index of Industrial Production (IIP), also showed positive momentum. The manufacturing sector’s growth accelerated to 5.8 percent in November 2024, up from 4.1 percent in October.
This growth is expected to lead to increased job creation, especially for young graduates from the country’s engineering institutes and universities, as the sector plays a crucial role in providing quality employment opportunities.
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Capital Goods and Consumer Durables: Strong Growth Drivers
One of the key indicators of investment in the economy is the production of capital goods, which include machinery used in factories. In November 2024, the production of capital goods rose by a robust 9 percent.
This reflects the real investment taking place in the economy, which is likely to have a multiplier effect, creating more jobs and boosting incomes in the future.
In addition to capital goods, the production of consumer durables also showed impressive growth. The production of electronic goods, refrigerators, and televisions surged by 13.1 percent in November 2024, indicating strong consumer demand for these products. This surge in demand for consumer durables reflects the rising incomes of Indian households, further contributing to the economic recovery.
Infrastructure Projects to Accelerate Employment Generation and Income Growth
The government’s focus on infrastructure and industrial growth is not only aimed at enhancing the country’s economic output but also at creating employment opportunities.
As investments in infrastructure projects continue to rise, the demand for skilled labor in construction, engineering, and technology sectors is expected to grow, offering new job prospects for India’s youthful population.
Additionally, the manufacturing sector’s strong performance, particularly in capital goods and consumer durables, is expected to generate significant employment opportunities. This is crucial for the country, as the manufacturing sector plays a vital role in providing quality jobs to young graduates and skilled workers, contributing to broader economic growth.
