Infrastructure will continue to stay the focal area of government's policy narrative. Last year’s budget emphasized on capital expenditure-led growth though the overall infrastructure spending was flat on year-on-year basis at Rs 11.2 lakh crores. Government might accelerate the overall spending towards this key segment of the economy to ensure that the consumption led recovery in the economy finds further footing.
Broad economic outlook is supportive. Union Minister for Railways, Communications, Electronics & Information Technology, Ashwini Vaishnaw recently stated that India’s reform momentum is firmly on track, driven by deep structural reforms which have transformed the Indian economy into a high-growth, resilient and globally trusted destination. Minister stated that landmark reforms undertaken in recent years including labour code reforms, simplification of the Goods and Services Tax, reforms in the energy sector and opening up of nuclear energy to the private sector, are generating strong investor confidence across sectors.
Highlighting India’s macroeconomic fundamentals, Vaishnaw stated that India is today the fastest-growing major economy in the world, with a consistent growth trajectory of 6–8 per cent projected over the next five years. He underlined that the combination of moderate inflation and high growth reflects the economic transformation achieved under the leadership of the Prime Minister over the past decade, which is drawing global attention.
Budget Expectations:
Infrastructure has consistently been a key area of India’s economic growth matrix in recent years. Capital expenditure (capex) was forecasted at Rs 11.21 lakh crore last year, a 10% increase from last year’s revised estimates. The corresponding figure for this year will be closely watched.
The budget is expected to broadly continue its infrastructure push, with further increases in capex, targeted support for urban redevelopment, and incentives for PPPs.
Railways will also be in focus. Railways’ internal revenue for 2025-26 is estimated at Rs 3,02,100 crore, an 8.3% increase over the previous year. Freight revenue constitutes 62% of total internal revenue, with a target of 1,700 million tonnes of freight in 2025-26, up from 1,509 MT in 2022-23. The operating ratio is projected at 98.43%, indicating tight margins but improved efficiency.
Major projects include the Mumbai-Ahmedabad Bullet Train, Udhampur-Srinagar-Baramulla Rail Link, and metro rail expansions in Surat, Patna, and Agra. The sector is also investing in dedicated freight corridors and multi-modal logistics parks to advance the ease of transportation.
Reserve Bank of India has recently proposed revised risk-weight guidelines for infrastructure loans offered by non-banking financial companies. These rules will likely lower capital requirements for lenders financing established projects by linking risk weights to project performance and repayment history. This seems to be an attempt to streamline the credit flow towards infrastructure projects and the budget might offer further measures towards this effect.
Stocks in focus:
Larson and Toubro, Bharat Forge Ltd, Cummins India Ltd, Adani Green Energy Ltd, Adani Ports & SEZ Ltd, Ultratech, KEC International
Outlook:
The broad policy guidance towards infrastructure will be similar to recent years. FM will mostly stick to increased budget allocations for smart cities, offer more funding to transport corridors, and announce new schemes towards urban development. India's infrastructure output rose 3.7% year-on-year in December, its fastest pace in four months, driven by strong cement and steel production. This, clubbed with robust leading indicators data shows that economic recovery is holding firm. FM will likely also take a stock of the entire post Covid period to offer a detailed perspective of physical and social infrastructure led economic growth in India.