R Shankar Raman, the Chief Financial Officer of engineering giant Larsen and Toubro (L&T), has expressed optimism about the government's continued focus on infrastructure spending in the upcoming budget for the financial year 2026-27 (FY27). He personally anticipates a significant increase in the capital expenditure (capex) outlay.
Anticipating a Sustained Capex Push
In a recent discussion, Raman pointed to the substantial commitment of over Rs 11 lakh crore made for capital expenditure in the previous budget (FY26). He believes the new budget, to be presented by Finance Minister Nirmala Sitharaman in the coming weeks, will follow a similar trajectory. "They will possibly go for a 10 per cent increase...that is what I am anticipating," Raman stated, clarifying this was his personal expectation.
He dismissed concerns that high government spending could crowd out private investment, citing the ample liquidity present in the financial system. Raman emphasized that for India to achieve its goal of becoming a developed economy by 2047, infrastructure development plays a pivotal role, and he is confident the government recognizes this priority.
Execution Hurdles and Manpower Shortages
While acknowledging a positive jump in the conception of large infrastructure projects, Raman highlighted persistent challenges. He noted that sometimes projects are awarded solely to the lowest bidder, who may lack the technical capability, leading to execution delays.
To counter this, he mentioned the government's recommendation for departments to adopt a "qualitative-based pricing mechanism". This system gives weightage not just to cost but also to a bidder's ability to complete projects on time and other qualitative factors. Raman believes that maintaining this balance will ensure contracts are bagged by competent companies.
On the critical issue of manpower, a concern L&T has raised repeatedly, Raman admitted the challenges continue. He explained that construction work is often less favoured due to the availability of alternative employment. Government schemes guaranteeing work for up to 125 days also make potential workers hesitant to leave their native places.
The pandemic further altered mindsets, as workers faced difficulties returning home during lockdowns. "The best antidote to that would be to take projects closer to their places of residency, which means you will have to go deeper into the country," the CFO suggested, a strategy he sees both the government and industry pursuing.
Private Capex and Governance Maturity
On the private investment front, Raman observed positive momentum across several sectors. He listed automobile, construction equipment, steel, minerals and metals, semiconductor, and electronics as industries that are currently investing.
He also welcomed the government's openness to engage with industry and stakeholders during the budget formulation process, calling it a sign of a mature system of governance. This collaborative approach, he implied, is crucial for addressing the complex challenges facing India's infrastructure and economic growth ambitions.
