Larsen & Toubro’s Chief Financial Officer R Shankar Raman expects government capital expenditure to rise by around 10 percent in the Union Budget for FY27, underlining the continued policy focus on infrastructure-led growth.
No Crowding Out Concerns Despite High Public Spending
Addressing concerns around weak private sector capital expenditure, Raman said he does not see a risk of public spending crowding out private investment. According to him, ample liquidity in the financial system should support both government and private sector investments simultaneously.He reiterated that infrastructure development remains central to India’s long-term growth ambitions, especially as the country works towards becoming a developed economy by 2047.
Budget Likely to Build on FY26 Capex Push
Raman pointed to the more than ₹11 lakh crore capital expenditure allocation in the FY26 budget and said the upcoming budget, to be presented by Finance Minister Nirmala Sitharaman, is likely to follow a similar trajectory.While clarifying that his view is a personal assessment, he said a 10 percent increase in capital spending appears likely, given the scale of infrastructure requirements and the momentum already visible in project planning and execution.
Quality Based Project Awarding Gains Importance
Highlighting challenges on the execution front, Raman noted that infrastructure still has significant ground to cover. He cautioned that awarding projects solely on the basis of the lowest bid often results in delays when contractors lack adequate technical capability.He said the government has advised departments to adopt a qualitative-based pricing mechanism, where factors such as technical strength and timely completion are given weightage alongside cost. Maintaining the right balance between pricing and execution capability, he added, will ensure that capable companies secure projects.
Manpower Shortages Continue to Impact Construction Sector
On workforce challenges, Raman acknowledged that manpower shortages remain a persistent issue for the construction and engineering sector. He said alternative employment options and government employment support schemes have made construction a less attractive choice for many workers.He also noted that the pandemic has altered worker preferences, with many reluctant to move far from their native places after experiencing mobility constraints during lockdowns.
Taking Projects Closer to Workers
Raman said one way to address manpower constraints is to execute projects closer to workers’ places of residence. This would require deeper penetration of infrastructure development into smaller towns and regions, an approach he said both the government and industry are increasingly pursuing.Private Sector Capex Showing Signs of Momentum
On private investment, Raman said capital expenditure activity is underway across several sectors, including automobiles, construction equipment, steel, minerals and metals, semiconductors, and electronics.He also welcomed the government’s consultative approach to budget formulation, noting that active engagement with industry stakeholders reflects a mature and responsive governance framework.
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