Budget 2026: A ₹12.2 Lakh Crore Capex Push for Infrastructure

Introduction to the Infrastructure-Led Growth Strategy

In the Union Budget for the fiscal year 2026-27, Finance Minister Nirmala Sitharaman announced a significant continuation of the government's infrastructure-focused economic strategy. A capital expenditure (capex) of ₹12.2 lakh crore has been allocated, marking a nearly 9% increase from the previous year's outlay of ₹11.21 lakh crore. This move signals a firm commitment to building a 'future-ready Bharat' by leveraging public investment to stimulate growth, enhance connectivity, and improve urban living standards.

Sustained Increase in Capital Expenditure

The government has consistently increased its capital spending over the last decade. The allocation has grown manifold from just ₹2 lakh crore in 2014-15 to the current proposal of ₹12.2 lakh crore. This sustained push is aimed at creating a multiplier effect on the economy, where public spending encourages private investment, generates employment, and builds long-term productive assets. The Finance Minister emphasized that this increased allocation is designed to maintain the momentum in infrastructure creation, which is seen as a critical driver for India's ambition to become the world's third-largest economy.

Urban Development Beyond Metros

A key strategic shift in this budget is the explicit focus on developing infrastructure in cities with populations exceeding five lakh, particularly Tier-2 and Tier-3 cities. These urban centers have been identified as emerging hubs of economic growth. To support this vision, the budget introduces the concept of City Economic Regions (CERs). An allocation of ₹5,000 crore per CER over five years is proposed, which will be distributed through a challenge-based, reform-linked financing model. This approach aims to strengthen regional growth clusters and reduce the developmental pressure on major metropolitan areas.

Mitigating Risk to Attract Private Capital

To address the long-standing concerns of private developers and lenders regarding risks in long-gestation infrastructure projects, the budget announced the creation of an Infrastructure Risk Guarantee Fund. This fund will offer prudently calibrated partial credit guarantees to lenders, specifically targeting risks during the construction and early operational phases. By de-risking projects, the government aims to improve the flow of private capital into the sector. Additionally, the budget proposes the creation of dedicated Real Estate Investment Trusts (REITs) to unlock and recycle the real estate assets of Central Public Sector Enterprises (CPSEs), freeing up capital for new investments.

Key Infrastructure Initiatives at a Glance

A Major Push for Logistics and Connectivity

The budget places a strong emphasis on transforming India's logistics landscape to reduce costs and improve efficiency. A new Dedicated Freight Corridor linking Dankuni in the east to Surat in the west will be established to facilitate faster and more reliable goods transport. The focus on waterways is another significant component. The plan to operationalize 20 new National Waterways, starting with NW-5 in Odisha, aims to connect mineral-rich regions with industrial hubs and ports. To support this, ship repair ecosystems will be developed in Varanasi and Patna, and regional training institutes will be set up to develop a skilled workforce for the sector.

Enhancing Passenger Mobility and Regional Integration

To promote environmentally sustainable and rapid passenger transport, the government will develop seven new high-speed rail corridors. These corridors, including Mumbai-Pune, Hyderabad-Bengaluru, and Delhi-Varanasi, are envisioned as 'growth connectors' that will integrate regional economies and reduce travel time between major cities. Furthermore, a Viability Gap Funding (VGF) scheme for seaplanes will be introduced to enhance last-mile and remote connectivity, which is also expected to boost tourism.

Conclusion: Building a Competitive Economy

The infrastructure initiatives outlined in the Union Budget 2026-27 reflect a comprehensive strategy to bolster India's economic foundations. By increasing public capex, de-risking private participation, and focusing on integrated transport networks, the government aims to lower logistics costs, improve industrial competitiveness, and foster balanced regional development. These measures are expected to create a robust framework for sustained economic growth in the coming years.