Capital Outlay refers to the expenditure incurred by the government on the creation of long-term assets such as infrastructure, buildings, roads, railways, irrigation systems, schools, hospitals, and equipment. It is a part of capital expenditure and is aimed at enhancing the productive capacity of the economy. Unlike revenue expenditure, which covers routine administrative and maintenance costs, capital outlay results in asset creation or improvement of existing assets.

Capital outlay is crucial for promoting economic growth, especially in developing economies like India. It leads to the creation of durable assets that boost infrastructure, improve connectivity, and support the delivery of public services. For instance, investments in roads, power supply, and digital infrastructure reduce transaction costs and enhance efficiency across sectors. Moreover, capital outlay has a strong multiplier effect—it stimulates employment generation, encourages private sector investment, and supports regional development. It also plays a vital role in achieving long-term policy goals such as urbanisation, industrialisation, and climate resilience. In the context of fiscal policy, maintaining a healthy share of capital outlay in total expenditure reflects the government’s commitment to productive investment, future-oriented planning, and sustainable economic development. Efficient utilization of capital outlay ensures higher returns in terms of growth, equity, and infrastructure readiness.