Railways Budget 2026: Capex Jumps 10% to Rs 2.81 Lakh Crore

Introduction

The Union Budget for 2026-27 has allocated a capital outlay of Rs 2.81 lakh crore for Indian Railways, marking a significant 10% increase from the previous fiscal's budget estimate of Rs 2.55 lakh crore. This enhanced funding underscores the government's continued focus on infrastructure-led growth, with a clear emphasis on improving safety, completing network electrification, and expanding modern train services. The allocation aims to accelerate critical projects and address long-standing challenges of network congestion and efficiency, aligning with the broader Viksit Bharat @2047 vision.

A Closer Look at the Budgetary Allocations

The steady rise in capital expenditure for railways reflects a strategic push to modernise the national transporter. The execution of allocated funds has also been robust, with the ministry reporting over 80% utilisation of its capital budget for FY26 by December 2025. This indicates strong project implementation and efficient use of resources. The increased outlay for FY27 is expected to maintain this momentum, directing funds towards high-priority areas that can deliver measurable outcomes in safety, speed, and capacity.

Safety and Technology at the Forefront

Safety remains a paramount concern, with a substantial portion of the budget earmarked for related initiatives. A key focus is the wider deployment of 'Kavach', the indigenous automatic train protection (ATP) system designed to prevent collisions. Funds will also be directed towards modernising signalling systems, renewing aged tracks, and upgrading infrastructure at critical points and crossings. The government's goal is to leverage technology to create a safer and more reliable rail network, reducing the risk of accidents caused by human error or infrastructure failure.

Expanding the Modern Train Network

The budget continues to support the expansion of modern, high-speed train services. This includes the manufacturing and rollout of more Vande Bharat Express trains, including the anticipated sleeper versions for long-distance travel. Additionally, the introduction of Amrit Bharat and Namo Bharat trains will continue, catering to different passenger segments and routes. The announcement of seven new high-speed rail corridors is a significant step towards building a next-generation transport network, connecting major economic hubs and reducing travel time.

Decongesting the Network for Efficiency

One of the most critical challenges for Indian Railways is network congestion, which limits average train speeds and affects punctuality. The FY27 budget addresses this by allocating significant funds for capacity enhancement projects. These include the construction of new lines, doubling of existing tracks on high-density routes, and gauge conversion. The expansion of Dedicated Freight Corridors (DFCs) will also continue, which is crucial for segregating freight and passenger traffic, thereby improving the operational efficiency of both.

The Push for Private Investment

While Gross Budgetary Support (GBS) remains the primary source of funding, the government is increasingly focused on attracting private capital to supplement public investment. The budget is expected to introduce more investor-friendly Public-Private Partnership (PPP) models with clearer risk-sharing frameworks. Asset monetisation through instruments like Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) is also being promoted to unlock value from existing railway assets and fund new projects. These initiatives are aimed at developing freight terminals, modernising stations, and introducing new technologies.

Industry Calls for Policy Stability

Industry leaders have welcomed the increased capital outlay but have stressed the need for policy certainty to encourage long-term private investment. The focus is shifting from headline allocation numbers to the quality of execution and reform. Stakeholders are seeking a predictable procurement roadmap, incentives for domestic manufacturing of rolling stock and critical components through Production-Linked Incentive (PLI) schemes, and support for research and development in green technologies like hydrogen-powered trains. A stable policy environment is seen as essential for Indian manufacturers to invest in capacity and technology, aligning with the 'Make in India' initiative.

Addressing Persistent Operational Challenges

Despite record investments, Indian Railways continues to face challenges such as stagnant average train speeds and a low share in national freight movement, which remains below 30%. The current budget's focus on decongestion and efficiency is a direct response to these issues. By improving track infrastructure and separating freight and passenger traffic, the railways aim to increase the average speed of both freight and passenger trains. A more efficient and faster freight service is critical to achieving the national logistics target of increasing rail's freight share to 45% by 2030.

Conclusion

The Railway Budget for 2026-27 signals a strategic shift towards execution, efficiency, and modernisation. The 10% increase in capital outlay to Rs 2.81 lakh crore provides the financial muscle to accelerate key projects in safety, network expansion, and modern rolling stock. The success of this budget will be measured not just by the funds spent, but by its ability to translate these investments into tangible improvements in performance, safety, and passenger experience, positioning Indian Railways as a key driver of India's economic growth.