Finance Minister Nirmala Sitharaman on Saturday dialed back on the railway budget slightly to Rs 2.55 lakh crore in the Union Budget 2025-26. For FY 2024-25, the government in the interim budget had allocated record capex to Rs 2.62 lakh crore for Railways. This time, the muted allocation, coupled with the absence of major reforms for the sector, sent railway stocks sliding shortly after the Budget presentation.
Shares of key railway companies reacted sharply to the announcement. IRCON fell over 6% to Rs 207.50 per share, IRCTC dipped 3% to Rs 797, while IRFC declined by 5% to Rs 144. Investor sentiment had been buoyed by earlier reports suggesting a potential 15-18% increase in budgetary support for Indian Railways, which now appears to have been overly optimistic.
Adding to the market disappointment, the government kept the capital expenditure (capex) for railways unchanged at Rs 2.52 lakh crore for FY26. Analysts had expected a significant boost in capex to support infrastructure growth, modernize freight corridors, and enhance passenger safety. The flat allocation dashed hopes, contributing to the negative stock market reaction.
Over the past decade, Indian Railways has made significant strides in infrastructure development. Between 2014 and 2024, it commissioned 31,180 track kilometers, with the pace of track-laying increasing from 4 km/day in FY15 to 14.54 km/day in FY24. Electrification also saw rapid progress, with 41,655 route kilometers (RKMs) electrified since 2014—nearly double the electrification achieved before that period.
Despite these achievements, the sector remains heavily reliant on government funding for capital-intensive projects. Railways generate revenue primarily from freight and passenger services but fall short in covering large-scale capital expenditures, often depending on extra-budgetary resources and central government grants.
In the interim budget, additional funds had been allocated to promote industrial development. The railway ministry said that these funds would support the essential infrastructure needed to develop industrial clusters at strategic nodes: Kopparthy on the Vishakhapatnam-Chennai Industrial Corridor, Orvakal on the Hyderabad-Bengaluru Industrial Corridor in Andhra Pradesh, and Gaya on the Amritsar-Kolkata Industrial Corridor in Bihar.