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2 Feb 2026·Source: The Indian Express
3 min
EconomyNEWS

FY27 Capex Target: ₹12.22 Lakh Crore, Debt-to-GDP at 55.6%

Central government maintains capex focus with ₹12.22 lakh crore target for FY27.

FY27 Capex Target: ₹12.22 Lakh Crore, Debt-to-GDP at 55.6%

Photo by Marija Zaric

The central government aims to maintain its capital expenditure (capex) thrust, targeting ₹12.22 lakh crore in FY27. The debt-to-GDP ratio is projected at 55.6%, with nominal GDP growth pegged at 10%. This indicates the government's commitment to infrastructure development and economic growth. Capital expenditure is seen as a key driver for boosting economic activity and creating jobs. The government's fiscal strategy focuses on sustaining growth while managing debt levels.

Key Facts

1.

FY27 capex target: ₹12.22 lakh crore

2.

Debt-to-GDP target: 55.6%

3.

Nominal GDP growth: Pegged at 10%

UPSC Exam Angles

1.

GS Paper 3: Indian Economy - Government Budgeting

2.

Link to Fiscal Policy and Economic Growth

3.

Statement-based MCQs on fiscal indicators

Visual Insights

Key Economic Indicators - FY27

Highlights of FY27 Capex target and Debt-to-GDP ratio.

Capex Target
₹12.22 Lakh Crore

Government's commitment to infrastructure development and economic growth. Important for understanding government priorities.

Debt-to-GDP Ratio
55.6%

Indicates the country's ability to pay back its debt. Lower ratio is generally better.

Nominal GDP Growth
10%

Crucial for reducing the debt-to-GDP ratio. Higher growth helps in managing debt levels.

More Information

Background

The concept of capital expenditure (capex) is fundamental to economic growth. Historically, governments have invested in infrastructure projects to stimulate economic activity. These investments create jobs and improve productivity. The focus on capex has evolved over time. In earlier decades, the emphasis was on large-scale industrial projects. Now, the focus is on a broader range of infrastructure, including transportation, energy, and digital infrastructure. The planning commission played a key role in earlier planning of capex. Fiscal responsibility is managed through mechanisms like the FRBM Act. This act aims to ensure that government debt and deficits are kept under control. The debt-to-GDP ratio is a key indicator of a country's fiscal health. The government's fiscal policy is crucial for balancing growth and stability.

Latest Developments

The government's commitment to infrastructure development is reflected in recent budget allocations. Increased spending on roads, railways, and ports is expected to boost economic growth. Schemes like PM Gati Shakti National Master Plan aim to improve infrastructure coordination. There are ongoing debates about the optimal level of government debt. Some economists argue that high debt levels can hinder long-term growth. Others believe that strategic investments in infrastructure can generate higher returns and offset the debt burden. The RBI's monetary policy also plays a role in managing inflation and interest rates. The government aims to sustain high levels of capital expenditure in the coming years. This is seen as crucial for achieving the country's economic growth targets. The focus is on improving the efficiency of infrastructure projects and attracting private investment. The target of ₹12.22 lakh crore in FY27 demonstrates this commitment.

Frequently Asked Questions

1. What is the FY27 capex target, and why is it important for the UPSC exam?

The FY27 capex target is ₹12.22 lakh crore. This figure is important for the UPSC exam because it reflects the government's commitment to infrastructure development and economic growth, key areas for economic policy questions.

2. Explain the concept of 'debt-to-GDP ratio' in simple terms and its significance in this context.

The debt-to-GDP ratio compares a country's debt to its total economic output (GDP). A lower ratio generally indicates a healthier economy. In this context, the government aims for a debt-to-GDP ratio of 55.6% for FY27, showing an effort to manage debt while investing in growth.

3. How does the targeted capex for FY27 potentially impact job creation and economic activity?

Capital expenditure is seen as a key driver for boosting economic activity and creating jobs. Increased spending on infrastructure projects like roads, railways, and ports is expected to generate employment opportunities and stimulate economic growth.

4. What is the projected nominal GDP growth for FY27, and what does it signify?

The projected nominal GDP growth for FY27 is pegged at 10%. This indicates the anticipated rate at which the economy is expected to grow in current prices, reflecting both real growth and inflation.

5. Why is the government focusing on capital expenditure, and what are its potential benefits?

The government is focusing on capital expenditure because it is considered a key driver for boosting economic activity and creating jobs. Potential benefits include improved infrastructure, increased productivity, and higher economic growth rates.

6. What are the potential challenges in achieving the targeted debt-to-GDP ratio of 55.6%?

Potential challenges include unexpected economic slowdowns, global economic shocks, and difficulties in maintaining fiscal discipline. These factors could impact the government's ability to manage debt levels effectively.

7. How does the PM Gati Shakti National Master Plan relate to the government's capex plans?

Schemes like PM Gati Shakti National Master Plan aim to improve infrastructure coordination. This can enhance the efficiency and effectiveness of capital expenditure, leading to better economic outcomes.

8. What are the key takeaways from the FY27 capex target for the UPSC Mains exam?

The key takeaways are the ₹12.22 lakh crore capex target, the 55.6% debt-to-GDP target, and the 10% nominal GDP growth projection. These figures demonstrate the government's fiscal strategy and priorities for economic development.

9. In your opinion, is the government's focus on capex sufficient to address the current economic challenges? What more could be done?

While the focus on capex is a positive step, it may not be sufficient on its own. Other measures, such as reforms to improve the ease of doing business and policies to boost private investment, could complement the government's efforts.

10. What recent developments have highlighted the government's commitment to infrastructure development?

Recent budget allocations with increased spending on roads, railways, and ports reflect the government's commitment to infrastructure development. Schemes like PM Gati Shakti National Master Plan also demonstrate this commitment.

Practice Questions (MCQs)

1. Consider the following statements regarding the central government's fiscal targets: 1. The government aims to achieve a capital expenditure target of ₹12.22 lakh crore in FY27. 2. The projected debt-to-GDP ratio for FY27 is 55.6%. 3. The nominal GDP growth is pegged at 8% for FY27. Which of the statements given above is/are correct?

  • A.1 and 2 only
  • B.2 and 3 only
  • C.1 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: A

Statement 1 is CORRECT: The central government aims to maintain its capital expenditure thrust, targeting ₹12.22 lakh crore in FY27. Statement 2 is CORRECT: The debt-to-GDP ratio is projected at 55.6% for FY27. Statement 3 is INCORRECT: The nominal GDP growth is pegged at 10%, not 8%, for FY27 as per the source.

2. Which of the following is the most likely impact of increased capital expenditure by the government? A) Decrease in economic activity and job creation B) Increased economic activity and job creation C) No significant impact on economic activity D) Increased inflation without economic growth

  • A.Decrease in economic activity and job creation
  • B.Increased economic activity and job creation
  • C.No significant impact on economic activity
  • D.Increased inflation without economic growth
Show Answer

Answer: B

Capital expenditure is seen as a key driver for boosting economic activity and creating jobs. Increased government spending on infrastructure projects leads to higher demand for goods and services, which in turn stimulates economic growth and employment. Options A, C, and D are incorrect as they contradict the expected positive impact of capex.

3. The Fiscal Responsibility and Budget Management (FRBM) Act, 2003, primarily aims to: A) Increase government spending on social welfare schemes B) Reduce the fiscal deficit and promote fiscal discipline C) Promote foreign direct investment in infrastructure D) Increase tax rates to boost government revenue

  • A.Increase government spending on social welfare schemes
  • B.Reduce the fiscal deficit and promote fiscal discipline
  • C.Promote foreign direct investment in infrastructure
  • D.Increase tax rates to boost government revenue
Show Answer

Answer: B

The FRBM Act, 2003, was enacted to ensure fiscal discipline and reduce the fiscal deficit. It sets targets for reducing the fiscal deficit and government debt. Options A, C, and D are not the primary aims of the FRBM Act.

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