Centre’s Defence Capex Swells by 227% YTD To Rs 254 Crore In May Amid India-Pak Tensions

The Centre's capital expenditure for defence shot up by 227% to Rs 254 crore in the April-May period amid the India-Pakistan tensions, whereas capex for Telecom surged by nearly 4000%, according to the latest data released by the Controller General o Accounts (CGA).

The massive surge in capex for Telecom and Food and Distribution of 4000% in financial year 2026 to date (FYTD) to Rs 165 billion came on account of BSNL recapitalisation and spending on the BharatNet program, according to Emkay Research' analysis of the CGA data.

The government's capital expenditure surged by nearly 54% during the April-May period of 2025-26 (FY26) against the last year. The surge in capex was significant because of subdued spending last year because of general elections.

Increase Tax and Non-Tax Revenue

Apart from the capex, there was a sharp increase in revenue as well. The revenue witnessed a growth of 10% in tax and a whopping 41.8% in non-tax revenues. The sharp uptick in non-tax revenue was led by the Reserve Bank of India's bumper dividend payout to the government on a year-on-year basis, as per the CGA.

The government received nearly Rs 7,32,963 crore of tax revenue and Rs 3,56,877 crore of non-tax revenue during the period. Out of the total revenue, Rs 1,63,471 crore was transferred to state governments as devolution of share of taxes by Government of India. It is worth noting, that the amount is Rs 23,720 crore higher than the previous year.
Apart from the non-tax revenue, the total expenditure incurred by the Indian government during the period stood at Rs 7,46,126 crore (14.7% of corresponding BE 2025-26). Out of the total revenue, Rs 5,24,772 crore was on 'Revenue Account' and Rs 2,21,354 crore was on 'Capital Account'.

"While prima facie, this indicates heavy frontloading of capex by the Centre in FY26 (vs the election-led slower capex in 1HFY25), a deeper dive into the numbers shows that there are a few outliers driving this growth," noted Madhavi Arora, Chief Economist, Emkay Global Financial Services citing the key outliers from the data.

Segments With Massive Surge in Capex in April-May

There was a significant surge in Telecom and Food & Public Distribution, and Defence segment. Other sectors like railways and roads have seen a modest growth of 5% and 3% respectively.

"The two outliers are - Telecom and Food & Public Distribution. Telecom capex for FY26TD is ~Rs165bn, nearly ~4000% higher than last year - on account of BSNL recapitalization and spending on the BharatNet program," stated Arora.

Explaining the surge in capex for Food & Public Distribution, Arora shared, " As for Food & Public Distribution, the capex number was also high in Apr'24, before tapering significantly during the year (even turning negative in a number of months) - this particular ministry is often used as a placeholder for funds which have not yet been allocated to specific ministries/projects."

"Of the major categories, Defence (Rs254bn, 227% YTD growth) has been the major driver, with a sharp pick-up in May partly amidst the Indo-Pak conflict," Arora added.