Infra is king in Union Budget 2026: ₹12.2 lakh crore push to build power plants, roads, rail network, ports & cities
If there is one clear message from Union Budget 2026–27, it is this: infrastructure remains the main engine of India’s growth story. The government has raised capital expenditure to a record ₹12.2 lakh crore for FY27. It is about 9% higher than last year’s ₹11.2 lakh crore. The capex outlay is higher even as the finance minister nudged the fiscal deficit down to 4.3% of GDP and commits to bringing central debt to around 50% of GDP by 2030.
For investors and policy watchers, this Budget is less about short term giveaways and more about building the hard and soft infrastructure like roads, rail, ports, urban centres, and green, tech enabled networks.term giveaways and more about building the hard and soft infrastructure enabled networks.
1. Infrastructure still backbone of the capex story
The numbers tell you how central infrastructure has become to the growth model.
Key macro and infra capex numbers of capex numbers
Metric | FY26 (Revised Estimate) | FY27 (From 1st April 2026) | Details |
|---|---|---|---|
Public capex outlay | ₹11.2 lakh crore | ₹12.2 lakh crore | 9% increase YoY |
Effective capital expenditure | ₹14.0 lakh crore | ₹17.1 lakh crore | Higher support to states, infra |
Fiscal deficit | 4.4% of GDP | 4.3% of GDP | Gradual consolidation |
Centre’s debt to GDP‑to‑GDP | 56.1% (FY26 RE) | 55.6% (FY27 BE) | Target 50% + or -1% by 2030 |
Within the total expenditure, the Transport sector receives ₹5.98 lakh crore, with significant allocations also directed towards Energy (₹1.09 lakh crore) and Urban Development (₹85,522 crore).
Also Read - Union Budget 2026: Key Infrastructure Sector Expectations for Growth, Railways, and Green Energy
2. Core Infrastructure: Risk guarantees, CPSE REITs & state support
Union Budget 2026 doesn’t just throw more money at infrastructure. It also tries to fix how infra is financed and reduce risk.
2.1 Infrastructure risk guarantee fund
A major structural reform is the creation of an Infrastructure Risk Guarantee Fund.
This new fund is meant to share some of the risk that banks and other lenders take when they finance big infrastructure projects.
By giving them a partial guarantee, it makes projects look safer on paper, improves their credit rating, and helps borrowers get loans at lower interest rates.
Over time, this can pull in long term capital from banks, insurers and pension funds that usually stay away from risky projects. Term
2.2 Monetising CPSE real estate via REITs
To unlock capital already locked in government balance sheets, the Budget proposes to sell or monetise unused land and buildings of CPSEs (Central Public Sector Enterprises) via REITs (Real Estate Investment Trusts), and then use that money to build new roads, rail, power plants and other projects.
This way, it can fund big infrastructure plans by unlocking value from old assets, instead of taking on a lot of new debt or sharply increasing taxes.
2.3 Stronger support to states
States remain key infra builders, and the Budget leans into that.
₹2 lakh crore support to states under the Special Assistance to States for Capital Investment (SASCI)Scheme to accelerate state level infrastructure creation.level infrastructure creation.
₹1.4 lakh crore Finance Commission grants in FY27 to states for rural and urban local bodies and disaster management.
This mix of grants, interest free loans and risk sharing tools is meant to keep both central and state pipelines running without blowing up debt metrics. Free loans and risk sharing tools is meant to keep both central and state pipelines running without blowing up debt metrics.
3. Railways & Logistics: highspeed corridors and dedicated freight
Indian Railways sits at the heart of the transport infrastructure push in this Budget.
3.1 Seven highspeed ‘growth connector’ corridors
The Budget announces seven highspeed rail corridors branded as ‘Growth Connectors’, all focused on high traffic economic and religious circuits:speed rail corridors branded as traffic economic and religious circuits:
Mumbai–Pune
Pune–Hyderabad
Hyderabad–Bengaluru
Hyderabad–Chennai
Chennai–Bengaluru
Delhi–Varanasi
Varanasi–Siliguri
These are described as ‘environmentally sustainable passenger systems’ and are designed to:
Cut travel time between major metros and emerging Tier II and Tier III cities.
Make it easier for people to travel for work, holidays and religious visits, especially on key temple‑town routes.
Plug into local infrastructure like metros, buses and roads so that connected cities function together as larger ‘city economic regions.’
3.2 New dedicated freight corridor: Dankuni–Surat
On the freight side, the Budget proposes a new Dedicated Freight Corridor (DFC) connecting:
Dankuni in the East to Surat in the West,
Passing through mineral rich areas, industrial centres and ports.rich areas, industrial centres and ports.
This is meant to:
Decongest mixed use rail lines.use rail lines.
Cut transit time and logistics costs for bulk commodities and containers.
Support Make in India exports from industrial belts to ports more efficiently.
For FY27, the government plans to spend roughly ₹2.7 to 2.8 lakh crore on Indian Railways in total. This includes money for new projects, safety upgrades, trains and wagons, and modernisation of the network.
Also Read- Union Budget 2026–27: Key Highlights on Infrastructure, Railways, and Manufacturing | m.Stock
4. Waterways, ports & coastal shipping: shifting more cargo to water
The Budget also deepens the push into cheaper, greener modes like waterways and coastal shipping.
4.1 National waterways and ship repair ecosystem repair ecosystem
Key announcements:
Operationalising 20 new national waterways, linking mineral rich belts, industrial clusters and ports.rich belts, industrial clusters and ports.
Setting up a ship repair ecosystem catering to inland waterways, so vessels have local MRO support and downtime is reduced.repair ecosystem catering to inland waterways, so vessels have local MRO support and downtime is reduced.
4.2 Coastal cargo promotion and seaplane schemes
To push more freight to water and create new connectivity niches:
Coastal Cargo Promotion Scheme aiming to raise the share of inland/coastal shipping from 6% to 12% by 2047.
Seaplane Viability Gap Funding (VGF) Scheme to indigenise seaplane manufacturing and support tourism connectivity routes where traditional runways are not viable.
Taken together, these measures are aimed at reducing logistics cost as a share of GDP, a longstanding competitiveness issue for India.
5. Urban infrastructure & city economic regions
Urban infrastructure is treated not just as civic spending, but as a growth engine via ‘city economic regions.’
5.1 Focus on Tier II and Tier III cities II and Tier III cities
Continued emphasis on cities with population above 5 lakh (Tier II and TierIII) for transport, water, sewage, and climate resilient infra.II and TierIII) for transport, water, sewage, and climate resilient infra.
The idea is to spread growth beyond metros, creating more jobs and consumption centres while easing pressure on big cities.
5.2 Municipal bond incentives: nudging cities towards markets
A notable reform here:
₹100 crore incentive for any single municipal bond issuance above ₹1,000 crore under the AMRUT linked framework.linked framework.
This aims to:
Encourage large, creditworthy cities to tap bond markets for funding.
Gradually shift urban infra financing from pure grants to a blended model of grants, loans and bonds.
5.3 Key urban development allocations
Metric | FY26 (Revised Estimate) | FY27 (From 1st April 2026) | Details |
|---|---|---|---|
Public capex outlay | ₹11.2 lakh crore | ₹12.2 lakh crore | 9% increase YoY |
Effective capital expenditure | ₹14.0 lakh crore | ₹17.1 lakh crore | Higher support to states, infra |
Fiscal deficit | 4.4% of GDP | 4.3% of GDP | Gradual consolidation |
Centre’s debt to GDP‑to‑GDP | 56.1% (FY26 RE) | 55.6% (FY27 BE) | Target 50% + or -1% by 2030 |
These numbers are a strong indication of how seriously the government is treating transport, power and urban services as pillars of the growth strategy.
6. Energy and climate reforms
Infrastructure is also at the core of India’s energy transition and climate agenda.
Key steps:
₹20,000 crore outlay for a Carbon Capture, Utilisation and Storage (CCUS) scheme.
Customs duty exemptions that directly support infra in energy and critical minerals:duty exemptions that directly support infra in energy and critical minerals.
Capital goods for manufacturing lithium-ion cells for battery energy storage. Ion cells for battery energy storage.
Sodium antimonate for solar glass manufacturing.
Extension of Basic Customs Duty (BCD) exemption for nuclear power project equipment till 2035, covering all plant sizes.
Capital goods for critical mineral processing in India mineral processing in India.
In parallel, the planned restructuring of Power Finance Corporation (PFC) and REC is intended to strengthen the long-term financing backbone for power and allied infra projects.term financing backbone for power and allied infra projects.
Union Budget 2026 may not feel exciting at an individual level as there are no new infra linked tax breaks for retail investors. The market also reacted nervously to higher STT and the lack of slab changes. But if you look through a long-term lens, the story is much clearer that, this is an infrastructure first Budget.linked tax breaks for retail investors term lens, the story is much clearer first Budget.
By committing ₹12.2 lakh crore of capex, launching an Infrastructure Risk Guarantee Fund, rolling out new rail corridors and freight lines, doubling down on waterways and ports, and pushing cities towards bond markets, the government is trying to build a stronger backbone for the economy. The aim is to support 7%plus growth over the long term without letting public debt get out of control.
The headline noise on tax and F&O shouldn’t distract from the bigger picture of roads, railways, ports, power, and citycentric infra, where a large part of the action and opportunity will be over the next decade.
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