Under the Union Budget 2026-27, the Centre has reaffirmed its strategic commitment to infrastructure development by raising public capital expenditure to Rs 12.2 trillion (3.1% of GDP), up from Rs 11.2 trillion in 2025-26 (BE). This enhanced outlay aims to bolster the overall infrastructure, with a targeted focus on Tier-II and Tier-III cities with populations exceeding 0.5 million. The Budget revolves around three core “kartavyas”: fostering economic growth, building capacity, and ensuring inclusive prosperity – signaling a steady, long-term approach to growth and fiscal governance. Other key themes also include boosting domestic manufacturing and supporting Micro, Small, and Medium Enterprises (MSMEs). Additionally, to build private developers’ confidence in mitigating risks during infrastructure development and construction, the government has proposed an Infrastructure Risk Guarantee Fund.
Some of the key highlights in various infrastructure sectors are as follows:
Roads
Under the Union Budget 2026-27, the budgetary allocation for the Ministry of Road Transport and Highways (MoRTH) is Rs 3.10 trillion, an annual increase of around 8 per cent from Rs 2.87 trillion (BE and RE).
The budgetary allocation for the National Highways Authority of India (NHAI) now stands at Rs 1.87 trillion, an annual increase of around 10 per cent from Rs 1.70 trillion (RE). Additionally, NHAI is planning to reduce its debt to below Rs 2 trillion by March 2026. In line with this, the internal and extra budgetary resources (IEBR) for the agency in 2026-27 remain zero for the fifth year in a row.
Railways
The Union Government has allocated Rs 2,928 billion for Indian Railways (IR) under the Union Budget 2026-27. Of the total outlay, Rs 2,778 billion will be provided by the central government as gross budgetary support (GBS).
Of the total allocation, funds worth Rs 367.21 billion have been allocated for construction of new lines, Rs 377.5 billion for doubling, Rs 46 billion for gauge conversion, Rs 50 billion for electrification, Rs 228.53 billion for track renewals and, Rs 25.57 billion for bridge works, tunnel works and approaches, Rs 521.08 billion for rolling stock and Rs 75 billion for Signalling and Telecommunication (S&T).
Besides, three externally aided rail projects received estimates. These are:
- The Dedicated Freight Corridor Project (Western Corridor) has received a budgetary estimate of Rs 10 billion for Rewari-Vadodara section (Phase-1) of the project.
- Haryana Rail Infrastructure Development Corporation Limited (HRIDC) has received Rs 4.88 billion for the Part A of the Haryana (Palwal-Sonipat) Orbital Rail Corridor Project.
- National High Speed Rail Corporation Limited (NHSRCL) has received Rs 61.03 billion for the Mumbai-Ahmedabad High-Speed Rail Corridor Project.
Aviation
Under the Union Budget 2026-27, the Ministry of Civil Aviation (MoCA) has been allocated Rs 21.03 billion, comprising Rs 20.58 billion in revenue expenditure and Rs 0.45 billion in capital expenditure. This allocation is about 12.4 per cent lower than the Rs 24 billion allocated in the budget of 2025-26, but around 2.3 per cent higher than the revised estimate for 2025-26. The budget includes outlays of Rs 3.42 billion for the Directorate General of Civil Aviation (DGCA) and Rs 1.14 billion for the Bureau of Civil Aviation Security (BCAS). An amount of Rs 5.5 billion has been earmarked for the Regional Connectivity Scheme (RCS). According to the budget speech, the government has proposed to exempt basic customs duty on components and parts required for the manufacture of civilian, training, and other aircraft. To enhance last-mile and remote connectivity and promote tourism, the government has proposed incentives to indigenise the manufacturing of seaplanes. A seaplane viability gap funding (VGF) scheme would also be introduced to provide operational support.
Ports and Shipping
Under the Union Budget FY 2026-27, the Ministry of Ports, Shipping and Waterways (MoPSW) has received an allocation of Rs 51.65 billion (budget estimate). The allocation is 48.8 per cent higher than the budget estimate of Rs 34.71 billion and 78.16 per cent higher than the revised estimate of Rs 28.99 billion for FY 2025-26.
Of the total allocation, it has provided Rs 3.4 billion for assistance to ship-building, research and development. The centre has provided Rs 15.47 billion to the Inland Water Transport Authority of India (IWAI) and Rs 630 million to the development of minor projects. Meanwhile, funds worth Rs 6.17 billion have been earmarked for the Sagarmala programme.
To promote environmentally sustainable movement of cargo, 20 new National Waterways (NW) to be operationalised over the next five years, starting with NW-5 in Odisha to connect mineral rich areas of Talcher and Angul and industrial centres like Kalinga Nagar to Paradip and Dhamra ports. A ship repair ecosystem catering to inland waterways will also be set up at Varanasi and Patna.
A coastal cargo promotion scheme will be launched to incentivise a modal shift from rail and road, to increase the share of inland waterways and coastal shipping from 6 per cent to 12 per cent by 2047. Another scheme has been proposed for container manufacturing to create a globally competitive container manufacturing ecosystem, with a budgetary allocation of Rs 100 billion over a five-year period.
Urban Rail
The Union Government allocated funds worth Rs 287.4 billion (budget estimate) for various metro rail and mass rapid transit system (MRTS) projects under Union Budget FY 2026-27. The allocation is 8.7 per cent lower than the budget estimate of Rs 312.39 billion and 4.7 per cent higher than the revised estimate of Rs 274.5 billion for FY 2025-26. Additionally, a sum of Rs 560.5 million has been sanctioned as grants for metro rail projects in the country. Also, a sum of Rs 22 billion has been sanctioned as grants to National Capital Region Transport Corporation for implementation of Regional Rapid Transit System (RRTS) projects in national capital region areas.
A Scheme for the Enhancement of Construction and Infrastructure Equipment (CIE) will be launched to boost domestic production of high-value, technologically advanced equipment. This will cover a wide range of CIE, from lifts used in multi-storey residential buildings and fire-fighting equipment of all sizes to tunnel-boring machines for metro projects and high-altitude road construction.
Water
As per the Union Budget 2026-27, the Ministry of Housing and Urban Affairs has received an allocation of Rs 855.22 billion. The allocation is around 49.50 per cent higher than the revised estimate of Rs 572.04 billion for 2025-26. Of the total allocation, the outlay for Swachh Bharat Mission (SBM)-Urban is Rs 25 billion while an allocation of Rs 80 billion has been earmarked for the Atal Mission for Rejuvenation and Urban Transformation (AMRUT).
As per the Union Budget 2026-27, the Ministry of Jal Shakti (MoJS) has received an allocation of Rs 948.08 billion. The total allocation is 128.80 per cent higher than the revised estimate of Rs 414.37 billion for 2025-26. The Department of Water Resources, River Development and Ganga Rejuvenation has been allocated Rs 199.13 billion and the Department of Drinking Water and Sanitation (DDWS) has been allocated Rs 748.95 billion. Under the DDWS, an outlay of Rs 676.70 billion has been made for the Jal Jeevan Mission (JJM) while Rs 71.92 billion has been earmarked under SBM-Grameen. Under the Department of Water Resources, River Development and Ganga Rejuvenation, an outlay of Rs 31 billion has been made for the Namami Gange Mission II.
Oil and Gas
The Union Government has allocated funds worth Rs 304.43 billion to the Ministry of Petroleum and Natural Gas under the Union Budget 2026-27. The allocation is around 57.5 per cent higher than the budget estimate of Rs 193.27 billion in 2025-26 and around 2.2 per cent higher than the revised estimate of Rs 298 billion in 2025-26. Of the total allocation, Rs 2 billion has been earmarked for strategic oil reserves and around Rs 110.85 under the liquified petroleum gas (LPG) subsidy.
Further, Rs 7 billion has been allocated under the programme component of the Indradhanush Gas Grid Limited (IGGL) part of the North East Natural Gas Pipeline Grid, Rs 1 billion under the scheme for providing financial support for the collection of biomass and Rs 0.2 billion for the scheme for the development of pipeline infrastructure for the injection of compressed bio gas (CBG) in the city gas distribution (CGD) network. Further, the budget speech has proposed for the value of biogas/CBG and the appropriate central tax, state tax, union territory tax or integrated tax, as the case may be, paid on such biogas or CBG contained in blended CNG, to be excluded from the transaction value for the purpose of computation of central excise duty on such blended compressed natural gas (CNG).
Power
For 2026-27, the Ministry of Power’s budget is allocated at Rs 299.97 billion (as against Rs 215.88 billion in 2025-26).
The finance minister has announced a set of measures spanning across higher customs duty reliefs, carbon capture support, transmission expansion for green corridors, public sector investments and restructuring of non-banking financial institutions.
- Carbon capture, utilisation and storage
The finance minister proposed an outlay of Rs 200 billion over the next five years to support carbon capture, utilisation and storage technologies (CCUS), with a focus on scaling deployment and improving technology readiness across five industrial sectors including power, steel, cement, refineries and chemicals.
- Exemptions
The budget has proposed a series of customs and excise duty exemptions to support clean energy manufacturing and energy security. Basic customs duty (BCD) has been exempted on the import of sodium antimonate used in the manufacture of solar glass. BCD exemption has also been extended to capital goods required for processing critical minerals in India, as well as to capital goods used for manufacturing lithium-ion cells for batteries deployed in battery energy storage systems. Further, the existing BCD exemption on imports of goods required for nuclear power projects has been extended till 2035 and expanded to cover all nuclear power plants, irrespective of capacity.
- Restructuring PFC and REC
The budget has proposed the restructuring of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to strengthen their role as long-term infrastructure financiers for the power sector. In parallel, the proposed Infrastructure Risk Guarantee Fund is aimed at crowding in private capital across the power value chain, including storage, by reducing financial risk exposure rather than relying on direct fiscal subsidies.
Renewable Energy
For 2026-27, the Ministry of New and Renewable Energy has been allocated Rs 329.14 billion, up from Rs 265.49 billion in 2025-26. The allocation for the solar sector is Rs 305.39 billion in 2026-27, up from Rs 242.24 billion in 2025-26. The allocation for the Pradhan Mantri Krishi Urja Suraksha evam Utthaan Mahabhiyan programme is Rs 50 billion, and that of the PM Surya Ghar: Muft Bijli Yojana is Rs 220 billion in the 2026-27 budget. The allocation for the National Green Hydrogen Mission is Rs 6 billion. The total budgetary allocation for wind and other renewable energy sources (grid and offgrid hydro power) is Rs 5.51 billion, and that for the bioenergy programme is Rs 2.75 billion. In the budget, Rs 5.99 billion has been allocated to the green energy corridor.
- Custom duty exemptions
To reduce input costs, boost domestic manufacturing, and enhance export competitiveness, the basic customs duties have been reduced on several items. In the renewable energy sector, the duty on sodium antimonate used in the manufacture of solar glass has been cut from 7.5 per cent to nil. Additionally, specified capital goods required for the manufacture of lithium-ion cells for battery energy storage systems will now attract nil basic customs duty. Furthermore, the budget has also proposed to exclude the entire value of biogas while calculating the central excise duty payable on biogas-blended compressed natural gas. In the critical mineral space, the basic customs duty on monazite has been reduced from 2.5 per cent to nil.
- Key schemes
A scheme for Rare Earth Permanent Magnets was launched in November 2025, with the government now proposing targeted support for mineral-rich states of Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to establish dedicated rare earth corridors. These corridors are aimed at strengthening the entire value chain, including mining, processing, research, and manufacturing, to build domestic capabilities in critical minerals. In addition, aligning with the Carbon Capture Utilisation and Storage (CCUS) roadmap launched in December 2025, the government plans to scale up CCUS technologies to achieve higher readiness levels across five major industrial sectors, namely power, steel, cement, refineries, and chemicals. To support this initiative, an outlay of Rs 200 billion has been proposed over the next five years, signalling a long-term commitment to industrial decarbonisation.
Telecom
In Union Budget 2026-27, the allocation for Ministry of Communications is Rs 739.90 billion and for Ministry of Electronics and IT is Rs 216.32 billion. There is a sharp increase in support for Bharat Sanchar Nigam Limited (BSNL) following higher capital infusion. The state-run operator is set to receive Rs 284.73 billion in FY 2026-27, up from Rs 68.85 billion in FY 2025-26. The enhanced allocation is meant to fund multiple initiatives and internal requirements, including BharatNet, capital expenditure such as spectrum costs, network expansion and operating expenses.
On digital infrastructure, the minister of electronics and IT highlighted the increasing importance of data centres, particularly AI-focused facilities, within the broader AI ecosystem. He noted that investments of about $70 billion are already under way, with a further $90 billion announced. The budget has proposed a tax holiday until 2047 for foreign companies that deliver cloud services to global clients using data centre infrastructure in India, while serving Indian customers through an Indian reseller entity. It has also proposed a 15 per cent safe harbour on cost where the Indian data centre service provider is a related entity.
The budget also unveiled India Semiconductor Mission 2.0, with an emphasis on building domestic capabilities across semiconductor equipment, materials, design ecosystem development and talent creation. An allocation of Rs 10 billion has been provided for FY 2026-27.
In electronics, the allocation for the Electronics Components Manufacturing Scheme has been proposed to rise to Rs 400 billion from around Rs 220 billion, backed by strong industry response that has reportedly exceeded initial projections.
For IT and IT-enabled services, the budget proposes new safe harbour provisions with higher thresholds and more competitive margins. It also groups software development, IT-enabled services, KPO and contract research and development (R&D) under a single category of Information Technology Services, with a uniform safe harbour margin of 15.5 per cent. The eligibility threshold for safe harbour is proposed to increase from Rs 3 billion to Rs 20 billion, supported by an automated, rule-based approval mechanism. The Budget further proposes fast-tracking the unilateral APA process for IT services and extending modified returns to associated entities entering into APAs.
Separately, the government has announced a manufacturing-related measure benefiting Apple by allowing foreign companies to supply machinery to contract manufacturers in designated customs-bonded areas for five years without triggering tax exposure, a provision applicable until the 2030-31 tax year. Devices sold within India from these facilities would still attract import duties, positioning such zones largely for export-oriented manufacturing.
Industry responses also drew attention to the push for data centres. The founder and chairman of Bharti Enterprises said the budget’s focus on infrastructure and logistics, combined with an emphasis on energy efficiency and support for the data centre ecosystem, should strengthen confidence in India’s digital economy. He also reiterated commitments to technology-driven growth, inclusion and education through the Bharti Airtel Foundation.