The Union Budget 2026-27 announced by Finance Minister Nirmala Sitharaman has significantly boosted infrastructure spending, with capex allocation increased to ₹12.22 lakh crore from the revised estimate of ₹10.96 lakh crore for the current fiscal, representing an 11.5% increase. According to reports from NDTV Profit, this substantial allocation is expected to have a multiplier effect on the economy, particularly when wisely spent on infrastructure. The Economic Survey for 2025-26 indicates that for every rupee spent on creating infrastructure, GDP increases by ₹2.5 to ₹3.5, making this budget crucial for long-term economic growth. With capex currently at 3.1% of GDP, this allocation is indicative of the government's dream of Viksit Bharat and achieving higher economic growth. The budget also strengthens the capital goods sector as a key driver of India's growth and industrial transformation, prioritising expansion of manufacturing capacities in seven strategic and frontier sectors.
The budget's infrastructure focus creates significant opportunities for the real estate sector through high-speed rail corridors connecting Mumbai-Pune, Pune-Hyderabad, Hyderabad-Bangalore, Hyderabad-Chennai, Chennai-Bangalore, Delhi-Varanasi and Varanasi-Siliguri. These corridors will enhance travel efficiency and influence housing interest near transit nodes. The ₹5,000 crore allocation for City Economic Regions (CER) over five years will improve civic infrastructure, transport, and public services in emerging urban centres, integrating Tier 2 & Tier 3 cities and temple towns into unified economic ecosystems. Additionally, ₹18,625 crore for PMAY-Urban and ₹3,000 crore for PMAY-Urban 2.0 will support housing construction and completion in growing cities. The budget also introduces MAT tax reduction from 15% to 14% (effective April 1, 2026) to lower the overall tax burden for developer companies.
The budget has allocated ₹2.94 lakh crore for road transport and highways and ₹2.78 lakh crore for railways in FY27, with railways receiving an additional ₹15,000 crore from internal and extra budgetary resources. As reported by NDTV Profit, defence capex is estimated at ₹2.19 lakh crore in FY27, up from ₹1.86 lakh crore in FY26, showing a 17.7% year-on-year growth. The government has also increased telecom capex to ₹73,990 crore for capital infusion into state-run BSNL, representing a 39.6% increase over the previous year. Additionally, housing and urban affairs allocation has been increased to ₹85,522 crore in FY27 from FY6 RE of ₹57,204 crore, an increase of 49.5%. The budget also includes ₹5,000 crore allocation for developing 'City Economic Regions' with focus on tier 1 and tier 2 cities plus temple towns.
The budget emphasizes scaling up manufacturing through rejuvenating legacy industrial sectors and creating 'champion MSMEs'. According to NDTV Profit, a dedicated ₹10,000 crore SME Growth Fund is proposed, while the Self-Reliant India Fund will be topped up with ₹2,000 crore to continue supporting micro enterprises. The budget also focuses on the India Semiconductor Mission 2.0 (ISM 2.0) to produce equipment and materials, design full-stack Indian IP, and fortify supply chains. Additionally, a ₹10,000 crore allocation has been proposed for container manufacturing over five years. The budget also includes ₹40,000 crore outlay for the Electronics Components Manufacturing Scheme and ₹25 crore for building AI missions. For developing 'City Economic Regions' with focus on tier 1 and tier 2 cities plus temple towns, an allocation of ₹5,000 crore is made. A Scheme for Enhancement of Construction and Infrastructure Equipment (CIE) is proposed to strengthen domestic manufacturing of high-value and technologically advanced construction and infrastructure equipment, including lifts, fire-fighting equipment, and tunnel-boring machinery.
Financing remains the largest gap in India's energy transition, with the budget addressing this through increased allocations to key institutions. Increased allocations to Indian Renewable Energy Development Agency (IREDA) and Solar Energy Corporation of India (SECI) from around ₹36,000 crore to ₹43,000 crore, along with plans to restructure Power Finance Corporation (PFC) and the Rural Electrification Corporation (REC), are welcome developments. The proposed Infrastructure Risk Guarantee Fund could help de-risk lending, while broader use of credit guarantees and risk-sharing instruments could further mobilise private capital, particularly for EV manufacturing and MSMEs across clean energy value chains. According to IEEFA analysis, budget 2026 reflects strong macro-fiscal ambition with additional emphasis on grid infrastructure, energy storage, transport electrification and risk-mitigation mechanisms. Financial experts recommend that given the infrastructure-focused budget, diversified equity funds with exposure to the benefiting sectors would be appropriate for investors. In the core holdings comprising 65-70% of total equity portfolio, large cap funds and flexi-cap funds with a five-year investment horizon are recommended, while for the satellite portfolio of 30-35%, mid-cap and small-cap funds can be considered based on risk appetite.
Despite increased spending, the government has maintained fiscal discipline with the fiscal deficit target pegged at 4.3% of GDP for FY27 compared to 4.4% in FY26. According to NDTV Profit, India's debt-to-GDP ratio is estimated at 55.6% in FY27 versus 56.1% in FY26. The budget also allocates ₹7,350 crore for infrastructure maintenance, up from ₹7,000 crore in previous estimates, ensuring continued functionality of roads, utilities, and civic systems. This balanced approach ensures long-term economic stability while supporting infrastructure development and manufacturing growth initiatives outlined in the budget. The government's capital outlay has risen 4.2× from ₹2.63 lakh crore in FY18 to ₹11.21 lakh crore in FY26, demonstrating sustained commitment to infrastructure development and industrial capacity building.