Union Finance Minister Nirmala Sitharaman on Sunday unveiled a significant boost to capital expenditure, raising the allocation by nearly 9 per cent to Rs 12.2 lakh crore for the financial year 2026-27. This move underscores the government's intensified focus on infrastructure-led growth as part of its ambitious "future-ready Bharat" push, aimed at fostering long-term economic resilience and development.
Sustaining Momentum in Infrastructure Creation
Presenting the Union Budget in Parliament, Sitharaman highlighted that the higher capital expenditure outlay is designed to sustain the momentum in infrastructure creation and support robust economic growth. The allocation marks a notable increase from Rs 11.21 lakh crore in FY 2025-26, reflecting a consistent upward trajectory in public investment.
Public capital expenditure has seen a manifold rise from Rs 2 lakh crore in 2014-15 to Rs 11.2 lakh crore in 2025-26. In her speech, Sitharaman emphasized, "In this coming year, that is, financial year 2026-27, I propose to increase it to 12.2 lakh crores to continue the momentum." This strategic increase aims to bridge infrastructure gaps and catalyze productivity across sectors.
Focus on Tier-2 and Tier-3 Cities
The finance minister reiterated that infrastructure development will continue to prioritize cities with populations above five lakh, including Tier-2 and Tier-3 centres, which have emerged as key growth hubs. To strengthen regional economic clusters, the government will allocate Rs 5,000 crore per City Economic Region (CER) over five years, fostering balanced urban-rural development.
Over the past decade, public investment has been bolstered by innovative financing mechanisms such as Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs), along with institutions like the National Investment and Infrastructure Fund (NIIF) and NaBFID. These tools have played a pivotal role in mobilizing resources for large-scale projects.
Infrastructure Risk Guarantee Fund to Encourage Private Participation
Addressing concerns of private developers, Sitharaman announced the creation of an Infrastructure Risk Guarantee Fund. This fund will offer prudentially calibrated partial credit guarantees to lenders, mitigating risks during construction and early project phases. By reducing financial uncertainties, the initiative aims to attract greater private sector participation in infrastructure projects, enhancing efficiency and innovation.
Key Infrastructure Initiatives Outlined in the Budget
The Budget outlined several transformative infrastructure initiatives to boost transport, logistics, and manufacturing:
- Dedicated REITs: To unlock and recycle real estate assets of Central Public Sector Enterprises (CPSEs), improving asset utilization.
- Coastal Cargo Promotion Scheme: Aims to increase the share of inland waterways and coastal shipping from 6% to 12% by 2047, promoting sustainable transport.
- 20 New National Waterways: To be developed over the next five years, enhancing connectivity and trade.
- Seven High-Speed Rail Corridors: Planned as inter-city growth connectors, reducing travel time and boosting regional integration.
- New Dedicated Freight Corridors: Linking Dankuni in the east to Surat in the west, streamlining cargo movement.
- Seaplane VGF Scheme: To support operations, improving accessibility to remote areas.
To strengthen domestic capacity, Sitharaman announced a scheme for enhancing construction and infrastructure equipment manufacturing. Additionally, training institutes will be established as regional centres of excellence to develop skilled manpower, ensuring a capable workforce for future projects.
Building a Competitive and Urbanized Economy
The finance minister stated that these combined measures reflect the government's intent to build infrastructure that supports growth, urbanisation, and industrial competitiveness in the coming years. By focusing on sustainable and inclusive development, the initiatives aim to position India as a global economic powerhouse.
As the government doubles down on its infrastructure-led growth strategy, the increased capital expenditure allocation signals a commitment to fostering a resilient economy. With targeted investments in key sectors and regions, the Budget 2026-27 sets the stage for accelerated progress under the "future-ready Bharat" vision, paving the way for enhanced quality of life and economic opportunities across the nation.
