Budget 2026 doubles down on public capex, widens infra pipeline 

Infra

• Budget 2026 increases FY27 capex to Rs 12.2 lakh crore from Rs 11.2 lakh crore.
• Fund to lower borrowing costs for private developers
• Focus on transport, urban, energy, and equipment manufacturing to boost growth

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The Budget 2026-reaffirmed the government’s infrastructure-led growth strategy, with a sharper focus on scaling public capital expenditure, crowding in private investment and expanding opportunity across transport, urban development, energy and heavy manufacturing.

Presenting her ninth successive Budget, finance minister Nirmala Sitharaman proposed to raise the capital expenditure to Rs 12.2 lakh crore in FY27, up from Rs 11.2 lakh crore in FY26, extending a decade-long expansion in public investment that has seen capex rise more than six-fold since FY15.

The continued increase comes even as the government adheres to a tighter fiscal path, with the deficit targeted at 4.3 percent of the GDP, underlining the primacy accorded to growth-supportive spending.

A notable shift in this year’s budget is the emphasis on risk mitigation and financing depth for infrastructure projects.

To strengthen lender and developer confidence during the construction phase, the government announced an Infrastructure Risk Guarantee Fund, which will provide calibrated partial credit guarantees to lenders. The move is expected to reduce project risk premiums and lower borrowing costs for private developers, particularly in large transport, urban and logistics projects.

Transport infrastructure

The Budget also placed renewed emphasis on transport infrastructure.

Proposals include new dedicated freight corridors linking eastern and western industrial belts, operationalisation of 20 new national waterways over five years and incentives to shift cargo movement towards coastal shipping and inland waterways. These measures directly benefit sectors such as ports, logistics, shipbuilding, inland vessel manufacturing, cement and steel, while also lowering economy-wide logistics costs over time.

Dedicated freight corridors that will link eastern mineral belts to western consumption and port hubs is expected to unlock fresh EPC opportunities across track-laying, signalling, rolling stock, electrification and station redevelopment.

For capital goods manufacturers, this translates into sustained demand for locomotives, wagons, signalling systems, power equipment and automation technologies over a multi-year execution horizon.

The proposal to develop seven high-speed rail corridors as “growth connectors” further deepens visibility for large-ticket civil works, tunnelling, viaduct construction and specialised rail equipment. These projects typically involve long gestation periods and high capital intensity, favouring well-capitalised EPC players and global technology partnerships, while also creating downstream demand for cement, steel, construction chemicals and precision engineering firms.

Urban Infra

Urban infrastructure emerged as another key beneficiary. The government reiterated its focus on tier 2 and 3 cities, positioning them as new growth centres. A structured push towards City Economic Regions will be backed by challenge-mode financing, with Rs 5,000 crore per region over five years proposed to fund infrastructure aligned to local economic strengths.

Complementing this, incentives for large municipal bond issuances aim to deepen urban financing markets and reduce dependence on budgetary support.

Energy

Energy and industrial infrastructure also received targeted support. The Budget announced a Rs 20,000 crore outlay over five years for scaling up carbon capture, utilisation and storage technologies across power, steel, cement and refining sectors, signalling future capex opportunities in clean energy and decarbonisation-linked equipment.

Construction equipment

The Budget’s dedicated scheme for enhancing construction and infrastructure equipment manufacturing strengthens domestic capacity in areas ranging from tunnel-boring machines and metro construction equipment to high-altitude road-building and fire-safety systems.

By linking infrastructure expansion with localised equipment manufacturing, the government is attempting to reduce import dependence while creating a virtuous cycle between project execution and industrial growth, thereby improving earnings visibility for both capital goods makers and EPC contractors alike.

Financing

Beyond headline allocations, the Budget also attempted to strengthen the financial plumbing required to sustain a long infrastructure cycle.

Measures to deepen the corporate bond market, including the introduction of a market-making framework and total return swaps on corporate bonds, are expected to improve liquidity and price discovery for long-term infrastructure paper.

This, along with incentives for large municipal bond issuances, could gradually lower the cost of capital for urban infrastructure projects and reduce reliance on bank financing.