India faces a critical infrastructure financing challenge with ₹168-172 lakh crore required by FY31, but ₹78-80 lakh crore remains outside the announced project pipeline, according to a comprehensive NaBFID-BCG report titled Channelizing Domestic and Global Capital for Infrastructure Financing. The study reveals that only 34-36% of demand is backed by proven financing models, creating an urgent need for reforms to mobilize domestic and global capital. With a ₹2-3 trillion annual funding gap and ₹31-32 lakh crore awaiting financial close and ₹21-22 lakh crore classified as stalled, the financing challenge is shifting from capital availability to project bankability. The report projects India's overall infrastructure requirement through 2047 at ₹680-770 lakh crore, highlighting the scale of financing required for roads, urban infrastructure, rail, water and other critical sectors.
Achieving India's Viksit Bharat vision will require critical private sector investment, as public expenditure alone cannot bridge the massive financing gap, Economic Affairs Secretary Anuradha Thakur emphasized at a conference of finance ministers and finance secretaries. Speaking at the conference with the theme 'Financing India's Journey Towards Viksit Bharat', Thakur highlighted that centre-state partnership on policy issues, on tapping financial sources, and on implementation can spearhead towards Viksit Bharat decisively. She noted that under ongoing global difficulties, this scale cannot be met solely by government budgets, and that private sector financing will need to play a critical role. The Secretary pointed out that India has been noted to be amongst the top attractive destinations for the global business environment, as highlighted in the World Economic Forum's Chief Economists Outlook of May 2026.
The National Bank for Financing Infrastructure and Development (NaBFID) is targeting a ₹5 lakh crore loan book by FY30, with the lender expected to add around ₹1 lakh crore every year. According to NaBFID Managing Director Rajkiran Rai, the target is supported by the bank's existing sanction book and project-finance pipeline. Rai stated that "we are likely to add ₹1 lakh crore every year" and expressed confidence in reaching the ₹5 lakh crore loan-book target by FY30. This ambitious expansion comes as the infrastructure sector faces rising interest rates and evolving financing dynamics, with Pandey noting that "the cost of funds is going to go up" due to the upward interest rate cycle. The report emphasizes that government capex would need to be complemented by private capital, while stronger project preparation, commercial bankability, risk allocation and capital recycling could broaden participation from domestic and global investors.
Alternative investment vehicles are managing more than ₹7 lakh crore in assets under management, with six SEBI-registered REITs and 27 InvITs having mobilised more than ₹2 lakh crore over the past seven years and assets under management of around ₹9.2 lakh crore at the end of FY26. According to NaBFID MD Rajkiran Rai, these vehicles now manage more than ₹7 lakh crore in assets under management and include Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) that are providing new funding channels for infrastructure projects. The report identifies partial credit enhancement, Infrastructure Investment Trusts (InvITs), Alternative Investment Funds (AIFs) and private credit as financing channels that could be scaled up. Additionally, infrastructure assets under management within global alternative investments reached about ₹15.3 lakh crore equivalent in 2025 and are projected to grow at around 12% annually through 2030, pointing to global capital as a potential source of additional funding.
The corporate bond market has shown remarkable growth, with companies raising more than ₹4.3 trillion through the corporate bond market in FY27 so far, while outstanding corporate bonds have increased from around ₹20 trillion in FY16 to ₹61 trillion at the end of August 2026. According to SEBI Chairman Tuhin Kanta Pandey, the growing role of the corporate bond market in complementing bank financing for long-lived infrastructure assets is becoming increasingly important. SEBI has implemented several reforms to facilitate this growth, including lowering the threshold for the electronic book mechanism from ₹50 crore to ₹20 crore, introducing incentives for retail participation in public debt issues, and reducing the minimum investment size for privately placed bonds. The regulator has also proposed relaxing the mandatory requirement to appoint a merchant banker for small-value debt private placements, subject to conditions, with the aim of reducing costs and delays while retaining investor protection.
Urban infrastructure is expected to account for almost half of the infrastructure requirement through 2047, with Rai stating that "urban infra is going to be the biggest piece, actually, where it will attract a lot of investment." Municipal bonds are emerging as a potential source of funding for urban infrastructure such as water supply, sewage, waste management, transport and roads. As of the end of FY26, 22 urban local bodies had raised more than ₹4,500 crore through 31 municipal bond issuances. However, the report notes that urban projects are often smaller, dispersed across municipal bodies and dependent on revenues from water, sanitation and transit, adding complexity to financing. The demand mix is changing significantly, with 80-85% of the forward pipeline comprising greenfield projects, exposing investors to land, construction and ramp-up risks. The report identifies four areas for further development: wider participation in REITs and InvITs, deeper corporate bond markets, continued evolution of the AIF framework and stronger municipal finance.
NaBFID is processing a $1 billion, 10-year dollar-denominated bond issue to support infrastructure financing, despite higher interest rates making fundraising more expensive. Rai noted that "while both US and domestic interest rates have increased, he said the Reserve Bank of India's swap window still makes it viable to raise funds overseas." The lender is working with regulators, rating agencies and other stakeholders to deepen the bond market and improve the flow of insurance and pension money into operational infrastructure assets. SEBI has also introduced pilot measures for tokenised corporate bonds, which explore issuing bonds as native digital tokens on a private, permissioned distributed ledger technology network operated by depositories. For NaBFID, the broader vision is to support infrastructure-led growth and improve living standards, with "our theme is building India and bettering lives."
