India’s infrastructure financing landscape is gradually evolving, with newer sources of financing playing a greater role alongside traditional funding channels. Several policy and regulatory reforms have enabled a more disciplined financing ecosystem. Public investment has scaled to record highs, while private capital is gaining momentum via innovative financing vehicles. Moreover, asset monetisation has now become a key driver for capital recycling. Traditionally, infrastructure financing relied on budgetary support from the central and state governments as well as lending from commercial banks. The country’s growing focus on infrastructure development has gained significant attention, leading to increased participation by multilateral agencies. In addition, a trifecta of fiscal strategies has been instrumental in supporting infrastructure creation. These are infrastructure investment trusts (InvITs), bonds and equity investments. Overall, asset monetisation via business trusts has unlocked over Rs 1.5 trillion, recycling funds into new projects and attracting global investors. Moreover, institutions like the National Investment and Infrastructure Fund (NIIF) and the National Bank for Financing Infrastructure and Development (NaBFID) have mobilised billions in global and domestic capital, strengthening governance and long-term financing flows.
Capex continues to rise
For the past 10 years, public capital expenditure has fuelled India’s infrastructure development. The central government has steadily increased budgets. The Union Budget 2026-27 has maintained the momentum. The overall budget has seen a sharp rise, growing from Rs 2 trillion in 2014-15 to a budget estimate of Rs 12.2 trillion in 2026-27, continuing its upward trajectory and underscoring the government’s commitment to infrastructure-led growth. The budget has also introduced smart steps to improve financing, promote public spending and reduce risks while accelerating asset monetisation. These efforts have helped attract private investment, create job opportunities and expand the economy.
In addition, these big public investments have built trust for investors and drawn private players into large-scale infrastructure projects. Continued investments in roads, railways, housing and energy projects has generated employment across sectors. Moreover, higher capex has stimulated demand for steel, cement, machinery and services, thereby improving industrial output and overall economic activity.
The budget also places emphasis on developing cities with populations above 0.5 million. Investments in housing, transport and urban infrastructure aim to promote balanced regional development, extending growth beyond big metro cities. To further unlock the potential of these cities, the budget has launched the City Economic Region (CER) scheme, allocating Rs 50 billion per CER over five years. The scheme will be implemented in challenge mode with a reform- and- results-based financing mechanism.
Infrastructure projects often hit snags such as early risks, delays and uncertainty in execution. To address this, the budget has announced the Infrastructure Risk Guarantee Fund, aimed at building investor confidence and ensuring timely project delivery. The fund provides partial guarantees to lenders, thereby reducing default risks for private developers and making loans safer.
Trends in bond issuances
Over the past decade, India’s corporate bond market has expanded significantly, with outstanding issuances rising from Rs 17.5 trillion in 2014-15 to Rs 53.6 trillion in 2024-25, recording an annual growth rate of nearly 12 per cent. The market now accounts for around 15-16 per cent of GDP, a considerable improvement. Encouragingly, corporate bond fundraising is increasingly on par with bank credit, underscoring growing investor confidence and the gradual shift towards market-based financing.
In terms of policy initiatives, SEBI has introduced electronic trading through the Request for Quote platform, facilitated retail access through online bond platforms, strengthened governance standards for credit rating agencies and debenture trustees, and simplified issuance norms. Additionally, the Reserve Bank of India has enhanced settlement architecture, introduced tri-party repo and credit default swaps, and supported the development of repo and clearing mechanisms. The centre has promoted InvITs and real estate investment trusts (REITs), and green finance initiatives to encourage long-term investment and deepen capital markets. Collectively, these reforms have laid a strong foundation for a more transparent, accessible and technology-driven bond market ecosystem.
Growing debt market
India’s debt markets are a cornerstone of infrastructure financing, allowing governments, companies and institutions to secure long-term funds via bonds and similar instruments. Investors then purchase these bonds, fuelling critical projects while earning steady fixed interest. Unlike equity, blended finance, or institutional capital, debt financing is straightforward, backed by clear repayment commitments. The government is bolstering these markets to better support infrastructure through targeted reforms. These include incentives on public debt for women, senior citizens, armed forces personnel and retail investors; simplified rules for issuers – like rationalised norms for large listed entities and digital annual reports; and an upgraded Electronic Book Provider framework for smoother private placements. Additional steps cover ESG-focused instruments such as green, social, sustainability, and sustainability-linked bonds, plus streamlined regulations to supercharge InvITs for capital recycling and new project funding.
The government is steadily building a market-driven infrastructure financing ecosystem through policy measures aimed at improving project viability, deepening capital markets and de-risking long-term investments. Key moves include viability gap funding for public-private partnerships (PPPs); frameworks for InvITs, REITs and infrastructure debt fund-NBFCs; long-tenor lending via NaBFID and the NIIF; and infrastructure debt fund tools to safeguard bond issuances, expanding domestic debt market participation.
NaBFID combines both financial muscle and developmental targets. By December 31, 2025, it had sanctioned approximately Rs 3.03 trillion and disbursed Rs 1.09 trillion across core infrastructure, social and commercial sectors. It is also advancing its mandate through innovations such as PCE products to attract more investors; PPP transaction advisory for bankable projects; a GIFT City arm to attract foreign capital; expanded urban financing (including Rs 5.2 billion in municipal bonds); deeper multilateral development bank ties; and state-level asset monetisation, positioning NaBFID as anchor investor in upcoming InvITs. Over the years, the NIIF has matured into a sovereign-backed asset manager, partnering with global investors such as the Abu Dhabi Investment Authority, Temasek, Australian Super, Ontario Teachers’ Pension Plan, CPP Investments, Asian Infrastructure Investment Bank, Asian Development Bank and New Development Bank. At present, it oversees $4.9 billion in assets under management across its funds.
Launch of NMP 2.0 and progress under NMP 1.0
The launch of the National Monetisation Pipeline (NMP) 1.0 in 2021 marked a watershed moment. Since its inception, it has gained nationwide attention for unlocking hidden value from public assets, setting an ambitious target worth Rs 6 trillion over 2021-22 to 2024-25 across 13 sectors spanning multiple ministries. The programme not only streamlined prior efforts through strong government support but also created a favourable regulatory environment for diverse monetisation modes. It introduced new investor classes by transforming operational assets into stable, investment-grade opportunities.
The outcomes have affirmed the programme’s effectiveness. It achieved an impressive 89 per cent realisation of Rs 5.3 trillion (Rs 3.87 trillion in 2021-22 to 2023-24; and Rs 1.43 trillion in 2024-25). Highways, railways, power, petroleum and natural gas pipelines, and telecom dominated with 72 per cent of the pipeline (Rs 4.3 trillion), while warehousing, coal and mining, aviation, urban real estate, ports and stadiums accounted for Rs 1.7 trillion.
The success of Phase I has set the stage for a more ambitious next phase. Building on this momentum, under Union Budget 2025-26, the centre has launched NMP 2.0, targeting Rs 16 trillion over the five-year period from 2025-26 to 2029-30. At its heart, the NMP tackles a problem common to all economies – how can a government fund massive infrastructure expansion without sinking deeper into debt or crowding out private investors? India’s monetisation strategy is not a hasty sale of public assets. It enables the recycling of proceeds into new infrastructure development. Under Phase II, a number of brownfield assets have already been earmarked, making asset recycling a predictable, multi-year investment stream.
The way forward
India’s infrastructure financing story marks a bold pivot towards scale, innovation and resilience. By combining public spending with institutional capital and other financial instruments, India is laying a strong foundation for inclusive growth. This approach not only channels capital efficiently but also fosters sustainability, competitivenes and trust in India’s growth path.
The recently released Economic Survey also underscores a critical need to strengthen India’s debt markets to help companies secure long-term funds for infrastructure and climate projects. It highlights key bottlenecks including limited securitisation, underdeveloped municipal bonds and conservative pension/insurance funds held back by regulations and inertia. Beyond rationalising taxes on debt instruments, the survey proposes measures such as credit enhancement for lower-rated issuers; standardised securitisation structures and disclosures; municipal capacity-building with pooled bond mechanisms; updated investment rules for long-term funds; and improvements in market infrastructure and insolvency frameworks. These steps are expected to enhance the scale and maturity of infrastructure financing while reducing the cost of capital. They envision a financial system that is stable yet competitive, diversified yet resilient, and innovation-friendly yet safe.
The road ahead requires a focus on ramping up private investment, which is currently a weak spot. The key enablers include strengthening PPPs, deepening municipal bond markets and rolling out pooled financing models. Even patient capital from pension funds and insurers – still underexposed to infrastructure – must be unlocked as a cornerstone of expansion.
