PHDCCI Seeks Capex-Led Growth Push in Budget 2026–27

PHD Chamber of Commerce and Industry (PHDCCI) has urged the Union Government to sustain public capital expenditure and tax rationalisation in Budget 2026–27, arguing that India’s next phase of growth will depend less on consumption impulses and more on productivity, competitiveness, and investment-led reforms.

The Stakes of a Budget Year

India enters Budget 2026–27 in an unfamiliar position for a developing economy: robust growth, subdued inflation, and geopolitical tailwinds that are reconfiguring supply chains in ways that could favour competitive manufacturing hubs. At the same time, private investment remains cautious and global demand uneven. The chamber argues that fiscal policy must now convert India’s macro stability into long-term competitiveness.

The headline recommendation from PHDCCI is unambiguous: treat public capital expenditure as the “primary device” for sustaining momentum and enabling a higher growth plateau. Infrastructure — from highways and ports to logistics corridors and water systems — is framed not just as construction spending but as an industrial and strategic asset.

The chamber believes a decisive capex push could move India toward a 10% medium-term growth path, a target last discussed during the peak of India’s 2003–2008 capex cycle.

The Competitiveness Gap

The chamber argues that India’s biggest challenge is not growth itself but how that growth is composed. Consumption can lift GDP in the short run, but durable competitiveness requires lower logistics costs, manufacturing scale, better skilling, and cheaper capital for MSMEs.

Infrastructure as Industrial Strategy

Investments in roads, rail, ports, and power distribution lower transaction and logistics costs — a long-standing disadvantage against East Asian competitors. Linking expenditures to PM Gati Shakti and urban resilience programmes could reduce friction for private investment and integrate firms more tightly into global value chains.

Evidence from prior capex cycles shows a flywheel effect: early public capital creates construction jobs, attracts private capital, and ultimately raises productivity and exports.

Manufacturing & MSMEs: The Stalled Engine

Manufacturing’s share in GDP has flatlined for over a decade, and MSMEs face high input costs, long maturation periods, and compressed margins due to global volatility. PHDCCI argues for predictable incentives, customs duty rationalisation, and stronger credit guarantees to de-risk investments.

The chamber cautions that fragmented incentives cannot substitute for a coherent competitiveness framework. Without scale, Indian firms struggle to transition from domestic suppliers to export-oriented value chain participants.

Agriculture & Rural Value Chains: The Productivity Pivot

Agriculture policy, the chamber notes, still allocates disproportionate resources toward short-term transfers. Instead, investment in irrigation, cold chains, storage, and processing could raise farmer incomes while generating non-farm employment.

Strengthening rural supply chains would support domestic resilience and agro-export ambitions at a time when global food security and climate volatility are reshaping agricultural trade.

Human Capital & Skilling: The Demographic Clock

India’s demographic advantage is time-bound. Rising skill mismatches in services and manufacturing point to a need for investments in hospitals, vocational training, and research infrastructure.

Capital expenditure in health and education also carries labour intensity during construction and productivity gains long after the asset is created — a dynamic typically overlooked in public debates that focus narrowly on subsidies or direct transfers.

Digital Public Infrastructure: The Multiplier Few Saw Coming

Digital infrastructure has become a silent multiplier. Broadband, data centres, fintech rails, and DPI frameworks such as UPI and ONDC compress transaction costs and lower barriers to entry for MSMEs and startups.

Pairing digital infrastructure with youth skilling could position India as a services export hub in the emerging AI economy.

Green Energy: From Climate to Geo-Industrial Play

Clean energy spending — renewables, storage, grid modernisation, EV charging — is increasingly strategic. Duty rationalisation on critical minerals and renewable inputs could support domestic clean-tech manufacturing and reduce import dependencies.

A Budget of Strategic Choices

The chamber’s recommendations converge on a core proposition: investment-first budgeting can convert India’s current growth into long-term competitiveness.

The fiscal trade-off remains real. The government must balance consolidation targets with capex priorities while managing political expectations around household tax relief and welfare spending. But the medium-term payoff, PHDCCI argues, could be transformative: a shift from welfare-centric to productivity-centric budgeting.

Budget 2026–27 will test whether India is ready to make that pivot. For businesses, the Budget is no longer just a fiscal document; it is becoming an industrial and economic strategy — a roadmap for how India intends to grow, compete, and move up the value chain.