The Union government’s robust focus on infrastructure development and investments in key sectors like railways, defence, power, and data centres is expected to sustain growth momentum into the financial year (FY) 2026 and beyond, according to a report by financial services firm Prabhudas Lilladher (PL).
The report highlights that a gradual economic recovery is beginning to take shape, driven by the government’s increased capital expenditure (capex). For FY25, the Centre has budgeted total capital spending of ₹11.1 trillion, underscoring its commitment to economic revival through strategic investments.
“With food inflation having peaked at 10.9% in October and the government accelerating capex spending, we expect a gradual economic recovery. Early signs of increased order activity in sectors such as railways, defence, power, and data centres indicate the potential for accelerated execution, which will drive growth in FY26 and beyond,” the report noted.
Crucial Role Of Union Budget
The upcoming Union Budget is expected to play a pivotal role in this recovery, with an emphasis on driving growth, boosting middle-class spending, and maintaining fiscal discipline. While revenue collection may fall short of targets, the report suggests that government measures to stimulate the economy could help bridge this gap, driving demand and supporting long-term growth.
For investors, the evolving landscape presents attractive opportunities across multiple structural themes. The “India Capex story,” which includes capital goods, infrastructure, ports, electronic manufacturing services (EMS), new energy, data centres, railways, and defence, is emerging as a significant growth driver.
Additionally, the report identifies healthcare (hospitals and pharmaceuticals), tourism (aviation, hotels, and accessories), discretionary consumption (e-commerce, jewellery, food services, and retail), and financialization (capital market entities and digital public infrastructure) as key sectors poised to benefit from the ongoing recovery.
The report concludes that these investments and policy initiatives offer significant potential for long-term gains, reflecting the government’s vision to propel India’s economic growth trajectory into the future.
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