Budget 2026: Infra sector wants regulatory easing, higher capital outlay

ICRA sees 5% growth in rail budget

Ahead of the Union Budget in February, infrastructure sector experts expect the government to push the pedal on capital expenditure in key sectors such as railways and recommend policy reforms to ease investments in the sector.

 

Rating agency ICRA expects the rail budget, which has been almost purely funded from government coffers over the past few fiscal years, to rise by 5 per cent to Rs 2.65 trillion, including extra-budgetary resources of Rs 10,000 crore, based on trends over the past two years.

 

“With electrification nearly complete, the focus will remain on decongestion through capacity augmentation — new routes, gauge conversion, track doubling, and dedicated freight corridors. Infrastructure modernisation, including rolling stock upgrades and station redevelopment, alongside safety enhancements, will remain critical,” said Suprio Banerjee, vice-president and co-group head at ICRA. 

He added that within capacity expansion, economic corridors coupled with accelerated deployment of Kavach 4.0 and advanced signalling across the network are expected to dominate both budgetary priorities and execution strategies. 

The railways ministry announced on Thursday that it will take up significant reforms this year, eyeing one such reform every week of the year.

 

Consultancy firm Deloitte has also recommended that the government should allow the merger of infrastructure investment trusts (InvITs) in India in this year’s Budget, as it can enhance scale, efficiency, and investor confidence in the infrastructure financing ecosystem.

 

“It enables consolidation of smaller trusts into stronger, diversified entities, improving liquidity, reducing costs, and attracting long-term institutional capital,” it said. Moreover, it also sought relief in goods and services tax (GST) applicability to corporate guarantees.

 

The firm said corporate guarantees are inevitable elements in the funding of infrastructure sector projects. “Levy of GST at 18 per cent on 1 per cent per annum of the guaranteed amount makes it a costly affair, especially as input tax credit is not available to infrastructure sector players such as renewable energy and real estate,” it said.

 

Deloitte added that industry expects the forthcoming Budget to review corporate guarantee provisions and provide exemption or relief to the infrastructure sector.

 

It also sought a relook at concession agreement structures and risk-reward sharing structures to improve private participation in sectors such as railways and water, and higher participation in the roads sector under the build-operate-transfer model.