Union Budget expected to boost infra; rail, road, aviation modernization a priority

The government allocated a record capital outlay of Rs 11.11 lakh crore for infrastructure in Budget 2024-25. Nearly half of that was set aside for road and railway projects-Rs 2.78 lakh crore for roads and Rs 2.65 lakh crore for rail-signalling the sector’s centrality in making India a $7-trillion economy by 2030. The focus on transport infrastructure is expected to continue with an estimated increase of 10% in Budget 2025-26.

The government will likely focus on improving road infrastructure in rural areas and smaller towns with increased spending on the Pradhan Mantri Gram Sadak Yojana. The Ministry of Road Transport and Highways (MoRTH) is expected to see an increase in outlay.

On the rail front, the Indian Railways may tread a balanced path in this Budget—expanding the Vande Bharat brand of trains for longer distances and high-speed trains, while also increasing production of non-AC and unreserved coaches to cater to the masses.

There could also be a big increase in spending on safety infrastructure such as track maintenance and upgrade on 70,000 route kilometres of railway network along with the manufacturing of Linke-Hofmann-Busch (LHB) coaches and modern locomotives.

The Centre is also expected to increase outlay for the port and aviation segments considering their pivotal role in terms of logistics and to improve passenger amenities.

The outlay has grown at an impressive annual rate of 27% over the past five years and industry insiders feel confident that allocation will increase for the transport sector as a whole, in keeping with the trend over the past 10 years, when it saw a fivefold jump in outlay.

“We expect the upcoming Budget to significantly prioritise infrastructure spending... Infrastructure development not only creates immediate employment opportunities but also facilitates long-term economic efficiency, productivity, and competitiveness,” Kavita Shirvaikar, Managing Director of Patel Engineering Ltd, tells BT.

Railways

Among the transport sectors, the Indian Railways, perhaps, requires the most attention. The fourth largest railway network in the world-which ferries nearly 19 million passengers every day—has faced significant criticism in recent years.

The criticism is that the Railways has been focussing more on premium services such as the Vande Bharat trains than on non-AC services. The government plans to introduce the flagship Vande Bharat trains on long-distance routes, too. Official numbers show that the Railways introduced 62 Vande Bharat services in 2024 while it introduced only two completely non-AC Amrit Bharat trains.

More non-AC trains are planned to be rolled out with modern amenities such as CCTV cameras, a passenger information system, aesthetically pleasing and ergonomically designed seats and berths, improved luggage racks, enhanced LED lighting, and additional charging sockets.

Vivek Lohia, Managing Director of rail wagon manufacturer Jupiter Wagons Ltd, says transformative investments in infrastructure are essential. “Projected investments of $200–250 billion in high-speed rail, freight corridors, and modernisation need to be realised to enhance connectivity, reduce logistics costs, and position India as a global economic powerhouse,” Lohia tells BT.

Safety is expected to remain a priority as the Railways upgrades infrastructure like tracks and signalling systems and implements automatic train protection systems.

Lohia says there is a need to expand funding for the Rashtriya Rail Sanraksha Kosh to improve safety measures. “Prioritise the development of economic railway corridors under the Gati Shakti Mission to optimise freight movement, reduce logistics costs, and support industrial productivity. Encourage greater private sector involvement through policies like the Liberalised Special Freight Train Operations and wagon leasing schemes,” he adds.

In terms of revenue, growth in freight earnings remains a concern for the Railways. The Railways earned the highest-ever revenues of around Rs 2.6 lakh crore in FY24 from freight and passenger ticket sales, with freight contributing 67.5%.

However, freight loading on the Railways registered sluggish growth during the first nine months of 2024. Can some measures give it a boost?

Lalit Chandra Trivedi, former General Manager of East Central Railway, says the Indian Railways has set a target of transporting 3 billion tonnes of freight by FY27, but is struggling to move beyond 1.6 billion tonnes (FY24). “Freight growth has been hardly 1-2%. The revenue loading of Indian Railways is not on par with the GDP growth of the country,” Trivedi tells BT.

First and last-mile connectivity has remained an issue for the Railways, he adds, and to address that there has to be an incentive to set up private sidings—railroad tracks that connect the company’s industrial premises for loading or unloading.

Trivedi says the Budget should announce measures to promote the production of commodity-specific wagons, like for bulk cement and other products, on the lines of those done for automobiles. Also on the agenda should be an increase in speed of freight movement. “Freight trains are unable to move beyond 25 km per hour despite two dedicated freight corridors, and that needs immediate attention,” Trivedi adds.

Highways

With consistent support from the Centre over the past few years, the speed of National Highway construction has increased, with a focus on improving connectivity across the country. But considering the boom in the logistics sector and increase in passenger movement on the roads, there is a need for the rate of highway construction to increase further to ensure that the wheels of commerce continue to roll smoothly.

The government has laid strong emphasis on initiatives like the Pradhan Mantri Gram Sadak Yojana (PMGSY), a flagship rural road development scheme, the Bharatmala Pariyojana, and national high-speed corridors to bolster connectivity through economic corridors in the rural areas with modern road infrastructure.

The Budget is expected to increase fiscal outlay for rural roads, keeping in mind its impact on economic growth and social inclusion. The PMGSY received Rs 16,100 crore in the current fiscal.

Aviation

The Indian aviation industry has seen massive growth in the last decade thanks to an increase in traffic and better connectivity to Tier II and III cities. The government has been working to enhance airport infrastructure and make it world-class as it strives to meet the projected increase in air passenger traffic, which is expected to grow around 7-10% annually.

The infrastructure build out will also help accommodate the record aircraft orders from Indian airlines, with 600 aircraft expected to be added to Indian hangars by 2030.

The Budget is expected to focus further on enhancing regional connectivity, modernising airport infrastructure, supporting domestic maintenance, repair, and overhaul (MRO), and aircraft leasing. These could improve operational efficiency and lower costs in the long run, but initially, capital expenditure might be passed on to customers.

Airfare is not regulated by the government and is driven by market factors such as demand, supply, seasonality, and fuel costs. However, the Budget allocation sets an agenda for the airline industry to follow. Passengers are pinning hopes on some relief on this front.

What is to be Done?

Industry players expect the FY26 Budget to focus on expanding the National Infrastructure Pipeline (NIP) to foster greater private sector participation; increase funding for critical areas such as highways, Railways, renewable energy, and water supply systems; and encourage investment in sustainable and resilient infrastructure, which will not only generate growth but also enhance environmental sustainability.

“We believe that a well-structured Budget that emphasises these areas will contribute to accelerated GDP growth and help India maintain its position as one of the fastest-growing economies globally. We hope to see the government align budgetary allocations with these priorities to support the vision of becoming a $7-trillion economy,” says Shirvaikar of Patel Engineering.

The industry feels that the Budget should look into innovative financing models such as infrastructure bonds, sovereign wealth funds, and green finance to ensure a steady flow of capital into large infrastructure projects.

Another key demand is simplifying the tax structures for infrastructure investments. This, they argue, will encourage more domestic and foreign capital inflows. “Surety bonds are essential in the infrastructure sector as they provide financial security and ensure project completion. These bonds help mitigate risks, enhance contractor credibility, and foster trust in large infrastructure projects,” Shirvaikar adds. By ensuring financial accountability, surety bonds facilitate smoother project execution, reduce delays, and attract investment.

Dimitrov Krishnan, Chairperson of Infrastructure Equipment Sector Council (IESC), says continued budgetary support is vital. “The government must focus on demand creation while facilitating industry with technological advancements. Support for electrification, such as tax benefits for electric machinery and mandating the use of sustainable technologies, would be a game changer,” says Krishnan, who is also Managing Director of Volvo Construction Equipment–India Business. He adds that accelerating water-related projects, including river linking to balance water resources, could unlock massive potential for the construction sector.

The government’s vision for a developed India, or Viksit Bharat, by 2047 has set a clear agenda for infrastructure development, requiring the country to be infrastructure-ready a decade earlier. This necessitates fast-tracking projects across transportation, urban infrastructure, housing, and water supply.

Budget 2025-26 is expected to provide further impetus to this vision to unlock India’s vast economic potential and make development more inclusive. 

@richajourno