Budget 2025: Railways to lead capex allocation; housing set for a boost

The Ministry of Railways is likely to top the capital expenditure allocation list in the upcoming budget leaving behind the Ministry of Highways, which hitherto has been the top recipient. Sources say railways may receive the largest pie of the capex budget on the back of better utilisation of FY25 allocation and project pipeline, which includes corridor development projects, and railway station development projects among others. Urban infrastructure and housing could be the other thrust areas in the upcoming budget.

A source close to the development pointed out that since the railway ministry has outpaced all other ministries and specifically the highways on capex utilisation in the current financial year, the upcoming budget may grant maximum allocation to the sector for infrastructure spending.

According to government data, the Ministry of Railways till November spent Rs 1,68,253 crore or 67% of the Rs 2,52,000 crore allocated to it in budget 2024-25. At Rs 1,46,827 crore, the Ministry of Road Transport and Highways could utilise only 54% of its capex allocation worth Rs 2,72,000 crore for the fiscal. In the budget 2026, the Railway Ministry is likely to get central capital expenditure support to the tune of Rs 2.9 lakh crore to Rs 3 lakh crore, while the highway ministry may have to rely more on the Build operate transfer, BoT (Toll) model of road development.

The Ministry of Highways has lost steam on highway construction in FY25 owing to several factors like land acquisition delays as well as the Union Cabinet not yet approving the revised cost of the Bharat Mala project.

Another thrust area, according to sources, is likely to be housing and urban development, wherein procedures for applications under the PM Awas Yojana will be eased even more. In the Budget 2024-25, the government announced allocation for the construction of three crore additional houses under the PM Awas Yojana, covering both rural and urban areas.

This includes PM Awas Yojana Urban 2.0, which aims to address the housing needs of one crore urban poor and middle-class families with an investment of Rs 10 lakh crore. Central assistance of Rs 2.2 lakh crore will be provided over the next five years to support this initiative. The scheme also offers interest subsidies to facilitate loans at affordable rates.