New Delhi, Oct. 5 -- Government spending on non-defence capital projects could decline by around 3 per cent in the second half of FY27 as fiscal pressures increase, despite a strong start to the financial year, Jefferies said in a report.

The brokerage said higher energy costs, rising subsidy spending and a lower nominal GDP estimate could limit the government's ability to maintain the current pace of capital expenditure while meeting its fiscal deficit target.

Central government capital expenditure increased 18 per cent year-on-year during April-August, higher than the 14 per cent growth targeted in the FY27 Budget.

However, the growth was led by defence spending. Defence capital expenditure rose 37 per cent during the period, while n...