Larsen and Toubro Chief Financial Officer R Shankar Raman expects the Union Budget for FY27 to raise central capital expenditure by about 10 per cent over FY26, and sees continued public infrastructure push as vital for growth. Raman does not expect a “crowding out” of private investment, citing comfortable liquidity in the financial system.
Raman said the government’s strategy of higher capital expenditure is central to long-term ambitions. “If India is to become a developed economy by 2047, infrastructure has a lot of role to play, and I think the government is seized of this. I am hopeful that they will allocate adequate resources in the budget to be able to do that,” Raman told PTI.
Capital expenditure outlook and infrastructure growth focus
Referring to the over ₹11 lakh crore capital expenditure allocation in the FY26 Budget, Raman said the upcoming document by Finance Minister Nirmala Sitharaman is likely to retain that direction. “They will possibly go for a 10 per cent increase…that is what I am anticipating, but that’s at a personal level,” Raman said, adding that infrastructure still needs sustained attention as “infrastructure has miles to go”.
Raman explained that large public projects are now planned on a bigger scale, covering transport, energy and urban assets. He said this pipeline supports contractors with strong technical capacity, provided tender processes value execution quality. The CFO also underlined that high state spending should coexist with private capital expenditure, rather than displace it, due to adequate funding sources.
Capital expenditure quality, bidding rules and project execution
The L&T executive flagged concerns around projects being awarded purely to the lowest bidder. Raman said this practice sometimes gives contracts to entities that lack sufficient technical strength, which later causes time overruns and implementation difficulties on the ground, affecting both costs and service delivery for users and authorities.
According to Raman, the Centre has urged departments to use a “qualitative-based pricing mechanism” that assigns weightage to timely delivery and other performance indicators, rather than price alone. As long as the “balance” between quoted price and an organisation’s capability, including track record of timely completion, is preserved, Raman believes better-equipped companies will secure more government work.
Private capital expenditure trends and sector-wise investments
On private capital expenditure, Raman said investment activity is underway across several industries, including automobile, construction equipment, steel, minerals and metals, semiconductor and electronics. These moves, according to Raman, complement public works and support demand for engineering, procurement and construction services across India’s industrial and infrastructure landscape.
He highlighted that the Centre’s willingness to hold detailed talks with industry bodies and other stakeholders during budget preparation helps align public capital expenditure plans with corporate investment cycles. Raman described this consultative approach as evidence of a mature governance framework, where policy makers factor in sectoral feedback before finalising major fiscal and infrastructure decisions.
The sectors Raman mentioned as active on private capital expenditure are shown below.
| Sector | Nature of capital expenditure activity |
|---|---|
| Automobile | Capacity additions and product-related investments |
| Construction equipment | Expansion to serve infrastructure and real estate projects |
| Steel | New facilities and upgrades to meet construction demand |
| Minerals and metals | Projects linked to resource processing and supply chains |
| Semiconductor and electronics | Plants to build local manufacturing capabilities |
While discussing capital expenditure, Raman also spoke about manpower challenges facing construction and engineering projects. L&T has repeatedly pointed to shortages of site workers, and Raman said these strains persist. Many potential workers now have other choices, which makes physically demanding construction roles less attractive than before.
Raman added that government employment schemes offering work for up to 125 days influence decisions on migration. People weigh these options before leaving their home locations for distant sites. The pandemic also changed mindsets, as many struggled to reach families during lockdowns, leading to deeper hesitation about long spells away from native places.
Raman argued that one response is to locate more projects near workers’ home districts. “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, which is what I think the government is doing, which is what all of us are also trying to do,” the CFO said, adding that such dispersion aligns with broader infrastructure goals.
