Budget 2026 keeps infra at core, raises capital spending to ₹12.2 trillion

Union Budget 2026 scales up capital spending to ₹12.2 trillion, keeping infrastructure at the centre of growth while signalling continued commitment to fiscal consolidation

Infrastructure remains at the centre of the government’s growth strategy in Union Budget 2026, with Finance Minister Nirmala Sitharaman announcing a rise in capital expenditure (capex) to ₹12.2 trillion in FY2026–27, up from ₹11.2 trillion budgeted for the current financial year (FY2025–26). Capital expenditure primarily includes spending on infrastructure such as roads and railways.

 

Presenting the Budget in Parliament on Sunday, Sitharaman underlined the government’s continued push towards infrastructure-led growth, even as it seeks to remain on the path of fiscal consolidation.

 

The higher capex allocation signals that public investment will continue to be the primary engine to support growth, job creation and private sector confidence.

 

 

The finance minister highlighted that a key focus of the new capex push will be cities with populations of over half a million, particularly tier-2 and tier-3 centres that are fast emerging as growth hubs.

 

“We shall continue to focus on developing infrastructure in cities with over five lakh (half million) population, that is tier-2 and tier-3 cities, which have expanded to become growth centres,” Sitharaman said in her Budget speech.

 

Beyond the headline capex number, the finance minister also unveiled an Infrastructure Risk Guarantee Fund aimed at providing prudently calibrated partial credit guarantees to lenders, in a move designed to boost infrastructure financing. To strengthen domestic manufacturing, especially in construction, a scheme for enhancement of construction and infrastructure equipment has also been announced.

 

In her speech, Sitharaman said the government aims to build domestic manufacturing capacity and strengthen energy security.  Read Union Budget 2026 LIVE

Capex trajectory over the years

According to the finance minister, public capital expenditure has jumped from about ₹2 trillion in 2014–15 to ₹11.2 trillion in the Budget Estimate for 2025–26, before being raised further in Budget 2026. This steady scaling up has made infrastructure spending one of the most consistent policy levers used by the Centre.

 

“During this past decade, our government has undertaken several initiatives for large-scale enhancement of public infrastructure, including through new financing instruments such as Infrastructure Investment Trusts and Real Estate Investment Trusts,” Sitharaman said during her speech.

 

Economists widely view capex as having a high multiplier effect, particularly in sectors such as roads, railways, housing, logistics and urban infrastructure. These investments, in turn, support manufacturing, services and employment generation.

 

The government expects the sustained capex thrust to crowd in private investment, strengthen urban infrastructure and support job creation.  ALSO READ | Budget 2026: Govt to roll out Semiconductor Mission 2.0 with ₹40,000 cr

Budget 2026: Key infrastructure announcements

New Dedicated Freight Corridor (DFC)

 

A new Dedicated Freight Corridor connecting Dankuni in the East with Surat in the West will be developed, strengthening the backbone for next-generation multimodal logistics and improving freight efficiency across regions.

 

Twenty new National Waterways

 

The government will develop 20 additional National Waterways, reinforcing inland water transport as a cost-effective, low-carbon option for cargo movement.

 

Seven high-speed rail corridors

 

To promote faster and environmentally sustainable passenger mobility, seven high-speed rail corridors were announced:

 

Mumbai–Pune, Pune–Hyderabad, Hyderabad–Bengaluru, Hyderabad–Chennai, Chennai–Bengaluru, Delhi–Varanasi, and Varanasi–Siliguri.

 

These routes are expected to connect financial centres, technology hubs, manufacturing clusters and emerging urban regions.

 

Rare earth corridors for future industries

 

Dedicated rare earth corridors linking Odisha, Kerala, Andhra Pradesh and Tamil Nadu will be developed to reduce import dependence and strengthen energy security, building on the rare earth permanent magnet scheme launched in November 2025.

 

Girls’ hostels in every district

 

Recognising the challenges faced by girl students in higher education, especially in STEM fields, the government will establish one girls’ hostel in every district through viability gap funding or capital support.

 

Telescope infrastructure for astrophysics

 

To promote astrophysics and astronomy through immersive learning, four major telescope facilities will be set up or upgraded: the National Large Solar Telescope, National Large Optical-Infrared Telescope, Himalayan Chandra Telescope, and the COSMOS-2 Planetarium.

 

University townships near industrial corridors

 

Through a challenge-based approach, the Centre will support states in creating five university townships near major industrial and logistics corridors, housing universities, research institutions, skill centres and residential complexes.

 

Construction and infrastructure equipment scheme

 

A new Scheme for Enhancement of Construction and Infrastructure Equipment will be introduced to boost domestic manufacturing of high-value, technologically advanced equipment, ranging from lifts and fire-fighting systems to tunnel-boring machines for metro and high-altitude road projects.

 

Seaplane manufacturing and operations

 

To enhance last-mile and remote connectivity and promote tourism, incentives will be provided for indigenised seaplane manufacturing, along with the launch of a seaplane viability gap funding scheme to support operations.

 

₹20,000 crore push for carbon capture technologies

 

Aligning with the roadmap launched in December 2025, Carbon Capture, Utilisation and Storage (CCUS) technologies will be scaled up across power, steel, cement, refineries and chemicals, with an outlay of ₹20,000 crore over five years.