The Economic Survey 2024-25, tabled on January 31 by Union Finance Minister Nirmala SItharaman, said slowdown in investment activity is temporary with green shoots in capital formation emerging. Government infrastructure spending is accelerating, supported by private investment and strong manufacturing capacity utilisation, it added.
Between July and November 2024, the Union government’s capital expenditure rose by 8.2%, and the RBI’s OBICUS survey showed manufacturing capacity utilisation at 74.7% in Q2 FY25, exceeding the long-term average of 73.8%, the report tabled on the first day of the Budget 2025 session said.
Infrastructure spending slowed in Q1 FY25 due to the election-related model code of conduct and erratic monsoon patterns. However, ministries overseeing infrastructure projects had already utilised 60% of budgeted capex by November 2024, a level comparable to past election years.
India’s Infrastructure Roadmap
India’s development goals require higher infrastructure spending, with capital expenditure on key sectors growing at 38.8% from FY20 to FY24. The National Infrastructure Pipeline (NIP) aims to mobilize ₹111 lakh crore in investments from FY20 to FY25, tracking over 9,766 projects across 37 sub-sectors via the India Investment Grid portal.
The National Monetisation Pipeline (NMP) seeks to unlock ₹6.0 lakh crore from FY22 to FY25 by monetising brownfield assets. By FY24, ₹3.86 lakh crore worth of transactions had been completed, mainly in roads, power, coal, and mining. The FY25 monetisation target is ₹1.91 lakh crore.
Challenges and Growth Trends
Despite government efforts, infrastructure investment gaps persist, requiring private sector participation and innovative financing. Competing for global investments, India must enhance supply chains, attract foreign capital, and improve project execution.
A RBI report found investment intentions rising to ₹2.45 lakh crore for FY25, up from ₹1.6 lakh crore in FY24. Some projects may extend into FY26, signaling steady investment momentum.
Construction has surged 15% above pre-pandemic levels, driven by infrastructure and housing demand. Utilities remain above pre-pandemic levels, while manufacturing and mining continue to lag. Rebounding rural demand supports consumption, but global trade pressures could challenge domestic growth.
India’s Rural Financial Institutions (RFIs) and Development Financial Institutions (DFIs) remain critical in supporting infrastructure expansion and financial inclusion. Public-private collaboration will be key to sustaining long-term growth.