India's Capital Expenditure Projected to Reach USD 2.2 Trillion by 2030

India is entering a significant capital expenditure upcycle, with Morgan Stanley projecting overall investments to increase 1.8 times to approximately USD 2.2 trillion by FY2030. This growth includes an estimated USD 1 trillion in incremental capex, which is expected to lift the investment rate from 34.6% to roughly 37.5% of GDP. The surge is driven by energy security, manufacturing supply chains, data centers, and defence.

Specific to the military sector, Kotak Institutional Equities projects defence capital expenditure will reach Rs 2.8 trillion by FY2030, growing at an 11 percent compound annual growth rate. This expansion is fueled by the Defence Acquisition Procedure 2020 and aggressive indigenization policies. India aims to reach Rs 500 billion in defence exports by FY2029 and is expected to spend USD 25-30 billion on drones and USD 4-5 billion on counter-drone systems over the next decade.

The Government of India is expected to maintain a budgeted capex target of Rs 12.2 trillion. Recent data indicates central government spending reached Rs 2.5 trillion in April-May FY27, marking a 13.4% year-on-year increase, with over half of those funds allocated to railways and roads. A potential new order pipeline for defence is estimated at Rs 6.5-7 trillion during FY2027-29 to modernize aging infrastructure and counter neighboring military spending.