Budget 2026 Outlook: How India's infra push may change in the next phase

As Budget 2026 approaches, policymakers and industry leaders weigh how India's infrastructure push may evolve - balancing capex momentum, fiscal discipline and private investment

On January 7, Prime Minister Narendra Modi said in a post on X that India’s “Reform Express” is continuing to gain momentum due to the government’s investment push and demand-led policies. He was referring to the first advance estimates of GDP for 2025-26 at 7.4 per cent announced by the statistics ministry earlier in the day. “Be it infrastructure, manufacturing incentives, digital public goods or ‘Ease of Doing Business’, we are working to realise our dream of a prosperous India,” PM Modi said. The reference to infrastructure in the PM’s post, both as a focus area of reforms and as a lever driving economic growth, is unmissable. It is not difficult to understand the source of this enthusiasm, given that the work on rapid expansion of national highways, renewable energy, and metro rail networks has been widely recognised as success stories.

 

Experts, however, point out that much of this infrastructure thrust over the past decade has been public investment-led asset creation, but the time has now come for a strategic pivot in the country’s infrastructure investments.

Why Budget 2026 may signal a shift in infrastructure strategy

“The next phase requires more than incremental capital. India is entering a growth cycle driven by manufacturing, urbanisation, and digital inclusion, which will place unprecedented pressure on infrastructure systems. The Budget 2026-27 therefore has the opportunity to accelerate India’s transition from asset creation to system efficiency, resilience, and long-term competitiveness,” says Satyam Shivam Sundaram, partner (Government and Public Sector) at EY India.

 

In her Budget speech last year, Finance Minister Nirmala Sitharaman had presented a strategic vision to propel India’s economic growth, with a strong focus on infrastructure as a catalyst for Viksit Bharat by 2047. The Union Budget for 2025-26 had provided for capital expenditure of ₹11.21 trillion for infrastructure, around 3.1 per cent of India’s GDP, building on the previous year’s ₹11.11 trillion.

Where capital allocation was focused in the last Budget

The ministries of roads and highways and railways accounted for almost half of that allocation, which was understandable given the direct impact of capital push in transportation sectors on the country’s logistics cost and their ability to attract private capital. The finance minister had also launched a new Asset Monetisation Plan (AMP) to unlock value from public assets, as well as a three-year pipeline for PPP projects to encourage private sector engagement. Focusing on urban development, the Budget had also provided for setting up of the Urban Challenge Fund of ₹1 trillion to transform cities into growth hubs.

 

A key highlight of last year’s Budget was also the focus on exports and the requirement for a strong supply chain system and availability of dedicated transportation vessels. As part of the largest plan to boost the maritime ecosystem, the government had announced the setting up of a Maritime Development Fund with ₹25,000 crore to foster private sector participation and expand maritime infrastructure as a step towards building Atmanirbhar Bharat.

Capex momentum and fiscal discipline in Budget 2026

“This year, the Budget must maintain the government’s capex momentum while signalling stronger fiscal discipline. A calibrated capital expenditure increase in the range of 10 to 12 per cent can sustain India’s growth impulse without overshooting fiscal targets. Further, the Budget may balance the allocation across sectors. While transport will remain central, we must ensure comparable investment in urban infrastructure, water, renewable energy, and digital or public tech infrastructure,” Sundaram said.

 

The government had also announced the National Infrastructure Pipeline (NIP) in 2019-20 as a comprehensive five-year roadmap (2020 to 2025) to invest over ₹100 trillion in social and economic infrastructure projects across transport, energy, urban and rural development, and digital infrastructure. As of March 2025, the NIP had covered 13,000 projects with a total cost of ₹185 trillion, with around half of them concentrated in the transport sector alone. Building on this momentum, the finance ministry earlier this month launched a new three-year pipeline of 852 infrastructure projects, mostly in the roads and highways sectors, to be developed under the PPP model at a cost of over ₹17 trillion. The upcoming Union Budget is expected to lend more clarity on the way ahead for the next phase of the NIP, often referred to as NIP 2.0.

Asset monetisation and private capital mobilisation

As far back as 2021, the previous edition of the NDA government had launched the National Monetisation Pipeline (NMP) to lease brownfield infrastructure assets, including roads, railways, and power transmission lines, to private investors, aiming to raise ₹6 trillion by 2025. In her Budget speech last year, the finance minister had indicated that ₹10 trillion worth of assets would be monetised in the next version of the NMP, covering five years. The Niti Aayog is now understood to be finalising this five-year roadmap for infrastructure monetisation, and the industry expects the upcoming Budget to cover that.

Roads, railways and maritime sector priorities

The roads and highways sector is expected to continue the capex outlay, over last year’s ₹2.8 trillion, with a higher allocation in this year’s Budget. Specifically, it should focus on fiscal incentives for mechanisation and modern construction technologies, reorient Bharatmala to complete projects faster and not just build more by pushing the system towards completion-centric metrics, says Manish Sharma, partner and leader (Infrastructure, Transport and Logistics) at PwC India.

 

“The Budget should focus on enabling a broader ecosystem of financial products, without the government itself becoming a direct lender of first resort. This includes incentivising the market for expanding guarantee and insurance instruments to de-risk projects, and facilitating cost-effective currency hedging products,” he said.

 

In order to boost investment in railway projects, the government must look at raising the existing budgetary support level of around ₹2.5 trillion, he said. “The Budget must look at increasing the efforts towards capital recycling of railway investments through various monetisation models like multi-operator regime, toll-operate-transfer (TOT) of freight lines, InvIT or REIT, and listing of umbrella projects housed under a platform company. The Budget must also encourage investments by the private sector in viable projects like freight corridors, passenger and freight terminals, where ₹20,000–25,000 crore should be generated from private investments. The focus should also be on decongestion of major freight and passenger routes, high-density networks with capacity augmentation,” Sharma said.

 

Budget 2026 will also be important for its provisions to boost the maritime sector, coming on the back of last year’s big-ticket measures like the Maritime Development Fund. “A key ask is the national programme for green shipping and green ports. Viability funding support shall be enabled for green methanol, ammonia, hydrogen bunkering, shore power, and port electrification, and incentives must be provided for low-carbon vessels,” Sharma pointed out.

Logistics efficiency and long-term growth

Large companies in the infrastructure space point out that the budgetary provisions this year will be watched for their ability to impact logistical efficiency, as the country’s economic growth over the next decade will be shaped by the strength and efficiency of its logistics backbone.

 

“Strategic budgetary investments in port-led, multimodal connectivity, particularly rail-based freight corridors, inland terminals, logistics hubs, and green infrastructure, will reduce trade costs, improve manufacturing productivity, create employment, and accelerate GDP growth. By mobilising private capital, enabling a shift from road to rail and waterways, and integrating domestic supply chains with global trade networks, India can scale as a competitive, sustainable, and resilient manufacturing and trading hub,” said Rizwan Soomar, chief executive officer and managing director, MENA (Middle East and North Africa) and India subcontinent, at logistics giant DP World.