Union Finance Minister Nirmala Sitharaman on Sunday announced a sharp increase in the Centre’s capital expenditure outlay for the next financial year, raising it by around nine per cent to Rs 12.2 lakh crore in the Union Budget 2026.
Capex remains key policy lever amid global uncertainty
Presenting the Budget in Parliament, Sitharaman said the enhanced allocation is aimed at sustaining the pace of infrastructure creation and reinforcing economic growth at a time when global conditions remain uncertain. Capital expenditure has been one of the government’s primary policy levers over the past decade, helping drive demand, employment and private investment.
Public capital spending has risen manifold since 2014–15
In her Budget speech, the Finance Minister underlined the significant expansion in public capital spending since 2014–15. “Public capital expenditure has increased manifold—from about Rs 2 lakh crore in 2014–15 to ₹11.2 lakh crore in 2025–26. For the coming financial year, 2026–27, I propose to raise it further to Rs 12.2 lakh crore to maintain this momentum,” she said.
Urban infrastructure, tier-2 and tier-3 cities remain focus areas
Sitharaman noted that infrastructure development has remained a central focus of the government’s economic strategy over the last ten years. She pointed to multiple initiatives taken to upgrade public infrastructure at scale, including the introduction of innovative financing mechanisms such as Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs), which have helped mobilise long-term capital.
The Finance Minister also highlighted the role played by dedicated institutions such as the National Investment and Infrastructure Fund (NIIF) and the National Bank for Financing Infrastructure and Development (NaBFID) in supporting infrastructure financing and reducing pressure on traditional banking channels.
Looking ahead, Sitharaman said the government will continue to prioritise infrastructure development in cities with populations exceeding five lakh. These include many tier-2 and tier-3 cities, which have grown rapidly over time and are emerging as key engines of regional economic growth. Improved urban infrastructure in such cities, she said, is critical for improving quality of life and attracting investment.
Infrastructure risk guarantee fund proposed to crowd in private investment
Addressing concerns raised by private sector participants, the Finance Minister announced a new proposal aimed at boosting confidence among private developers. She acknowledged that risks associated with the development and construction phases of infrastructure projects often discourage private participation.
To tackle this challenge, Sitharaman proposed the creation of an infrastructure risk guarantee fund. The proposed fund will offer prudentially calibrated partial credit guarantees to lenders, helping lower perceived risks and facilitate smoother access to finance for infrastructure projects.
She said the combination of higher capital expenditure, continued emphasis on urban infrastructure, and targeted measures to crowd in private investment reflects the government’s long-term commitment to infrastructure-led growth.
The increased capex outlay in the Union Budget 2026 is expected to support sectors such as roads, railways, urban development and logistics, while also creating a multiplier effect across the broader economy.