Highlights:

  • Capex Definition: Funds used by companies/government to acquire, upgrade, or maintain long-term physical assets like property, plant, equipment (PP&E), infrastructure, and machinery. Unlike OpEx, Capex is capitalised on the balance sheet and depreciated over years
  • India Government Capex Surge: Rose from ₹4.39 lakh crore (RE 2020-21) to ₹12.2 lakh crore in Budget 2026-27 (~10.9% increase over RE 2025-26). Focus on roads, railways, highways, and defence.
  • Private Sector Capex Trends: Surveyed 2,172 enterprises plan ₹4.9 trillion (₹4.88-4.89 lakh crore) in FY 2025-26. Peaked at ₹6.56 lakh crore in FY 2024-25 (66% growth since FY 2021-22). Manufacturing leads.
  • Standard Formula: CapEx = Ending PP&E – Beginning PP&E + Depreciation (Indirect method commonly used in Indian financial statements under Ind AS/Companies Act).
  • Economic Impact: Government’s capex strategy aims at “crowding in” private investment, job creation, and GDP growth. Supported by ₹1.5 lakh crore interest-free loans to states in FY 2025-26.

Introduction

Capital Expenditure (Capex) refers to the funds used by businesses and the government to acquire, upgrade, maintain, or improve long-term physical assets. These assets, such as property, plant, equipment (PP&E), infrastructure, machinery, buildings, and technology, are expected to generate economic benefits beyond one year.

In India, Capex has become a cornerstone of economic policy. The government has significantly ramped up capital spending to drive infrastructure development, job creation, and GDP growth under the Viksit Bharat vision.

Key Highlights

  • Government Capex surged from ₹4.39 lakh crore (RE 2020-21) to ₹12.2 lakh crore in Budget 2026-27, an 11.5% increase over revised estimates of 2025-26.
  • Private sector Capex intentions stand at ₹4.9 trillion (approx. ₹4.88–4.89 lakh crore) for FY 2025-26, following a peak of ₹6.56 lakh crore in FY 2024-25.
  • Major sectors: Manufacturing, roads & highways, railways, power, defence, and ICT.
  • Supported by ₹1.5 lakh crore in 50-year interest-free loans to states for infrastructure in FY 2025-26.

Capex vs Operating Expenses (OpEx)

  • Capex: Capitalised on the balance sheet, depreciated over time (long-term investment).
  • OpEx: Day-to-day expenses (rent, salaries, maintenance) charged immediately to the income statement.

Standard Capex Formula (Indirect Method)

CapEx = Ending PP&E – Beginning PP&E + Depreciation

This method is most commonly used in Indian financial statements prepared under Ind AS 16 and Schedule III of the Companies Act, 2013.

Direct Method Alternative: Net CapEx = Cost of New Assets Purchased – Proceeds from Sale of Assets

Why Capex Matters in India’s Economy

India’s Capex-led strategy aims to “crowd in” private investment. Public spending on infrastructure is expected to create multiplier effects on employment and manufacturing. However, analysts note challenges such as slower private response and the need for more focus on employment-intensive sectors.

Private sector investments are led by manufacturing (machinery & equipment form a major share), followed by ICT and power sectors.

Key Capex Takeaways

Capital Expenditure (Capex) remains a vital driver of long-term growth for both Indian companies and the government. In 2026, India’s aggressive Capex strategy, with government spending reaching ₹12.2 lakh crore and private sector intentions at ₹4.9 trillion, underscores a strong commitment to infrastructure development, manufacturing expansion, and economic self-reliance under the Viksit Bharat vision.

FAQs

1. How do I find a company’s Capex?

Check the Cash Flow Statement under Investing Activities for “Purchase of Property, Plant & Equipment” or “Capital Expenditure.” Review the latest Annual Report or quarterly results on BSE/NSE.

2. Is high Capex good or bad for investors?

High Capex is positive for growth companies funding expansion. For mature firms, persistently high Capex without strong returns may indicate inefficient capital allocation.

3. How does Capex affect dividend payments?

High Capex uses cash that could go to dividends. Growth companies prioritise reinvestment over payouts. Dividend investors prefer firms with stable, lower Capex needs.

4. What’s the difference between gross and net Capex?

Gross Capex is total spending on new assets. Net Capex subtracts money received from selling old assets, giving a clearer picture of actual net investment.

5. Can companies reduce Capex during downturns?

Companies often cut discretionary expansion Capex during downturns to preserve cash, while maintaining essential maintenance Capex. This helps short-term liquidity but can impact long-term growth.