New Delhi, Sept. 24 -- The Centre has the fiscal space to lift infrastructure spending beyond the budgeted Rs.11.21 lakh crore for this financial year if private sector spending remains subdued amid global headwinds, two officials said. The government has room to raise its 2025-26 capital expenditure (capex) by Rs.20,000-30,000 crore, contrasting with FY25's cutbacks and taking it closer to Rs.11.5 lakh crore, they added. Even if its spending runs slightly above target, the Centre will stick to its fiscal deficit goal of 4.4% of gross domestic product (GDP) for FY26, supported by buoyant tax collections and a record dividend transfer from the Reserve Bank of India, the officials said, declining to be identified. Despite repeated calls from the government, private sector investment has been slow to pick up, subdued by US tariff pressure on exports and other external challenges. Gross fixed capital formation, a proxy for investments, slowed to 7.8% in April-June from 9.4% in the preceding quarter, but still showed signs of robust growth supported by higher year-on-year government capex. The government's capital spending on infrastructure rose to Rs.3.47 lakh crore in April-July from Rs.2.61 lakh crore in the same period last year. In FY25, the government trimmed its budgeted capex of Rs.11.11 lakh crore to Rs.10.18 lakh crore, with actual expenditure at Rs.10.52 lakh crore. Last week, Union finance minister Nirmala Sitharaman urged industry to shed its caution and expand capacity, stressing that the government had delivered on tax reforms, foreign investment liberalization and improvements in ease of doing business. She also urged businesses to invest in job creation and collaborate with the government on upskilling the workforce. Meanwhile, anticipated strong consumption during the festive season, along with additional gains from the goods and services tax (GST) rate rationalization, is expected to boost government revenues. The Centre's capex is also expected to pick up in the second half of the year. "Several infrastructure projects that had stalled have regained momentum. So, capex spending could rise further in the second half of the fiscal year," said the second official. "As things stand, there's fiscal space to increase capex spending by another Rs.20,000-30,000 crore in FY26, especially in sectors which have seen lower investments." Experts said boosting central capex can spur demand and incomes through a strong multiplier effect, complementing recent cuts in direct taxes, GST reforms and monetary easing....