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India’s Infrastructure Push to Propel Economic Growth in FY26

2025-01-14

The Indian government’s capital expenditure on large-scale infrastructure projects, including highways, railways, and power development, along with investments in critical sectors such as defence, is expected to drive economic growth in FY2025-26 and beyond. A report by financial services firm Prabhudas Lilladher (PL) highlights the positive impact of these initiatives, with significant momentum already evident in sectors like railways, defence, power, and data centres.

The 2024-25 Union Budget allocated an impressive Rs 11.1 trillion for infrastructure, and this figure is expected to increase in the forthcoming 2025-26 budget. The report emphasises that these investments could serve as a catalyst to stimulate demand and sustain long-term economic growth, particularly as inflation eases.

Additional sectors, including healthcare, tourism, discretionary consumption, and financial services, are also positioned to benefit from the economic recovery. Industrial growth has shown encouraging signs, with November 2024 witnessing a 6-month high growth rate of 5.2%, up from 3.5% in October and significantly higher than the 2.5% recorded in November 2023.

The manufacturing sector, which constitutes over 75% of the Index of Industrial Production (IIP), recorded growth of 5.8% in November 2024 compared to 4.1% in October. This growth is expected to contribute significantly to employment creation, especially for young graduates from engineering institutes and universities.

The production of capital goods, a key indicator of real investment, surged by 9% in November 2024, reflecting robust economic activity. Additionally, the consumer durables segment, including electronic goods, refrigerators, and televisions, registered a remarkable 13.1% growth, signalling higher consumer demand driven by rising incomes.

With an anticipated growth-driven focus in the upcoming budget, India’s economic revival appears poised to gather further momentum, supporting industrial expansion, job creation, and increased consumer spending.

(ET)