India’s 2025 Budget shows flat capex allocation, with minor hikes for highways and steady railways funding

In a notable departure from previous years, the allocation towards capital expenditure in the 2025 Budget has remained almost unchanged. Moreover, the government has significantly underperformed in utilising the funds allocated for 2024-25.

At ₹11.21 lakh crore for FY26, the capital expenditure budget estimate is nearly flat compared to ₹11.11 lakh crore allocated in the previous financial year. Additionally, the revised estimate for FY25 has been reduced by 8.34%, now standing at ₹10.18 lakh crore, reflecting poor utilisation by the concerned ministries.

As in previous years, the Railway and Highways ministries have received a major share of the capital expenditure budget for 2025-26. However, the allocation to the Railway Ministry remains unchanged, while the Highway Ministry has seen a slight increase. The allocation to railways for FY26 remains steady at ₹2.52 lakh crore, while the capital expenditure for highways has been raised to ₹2.87 lakh crore, up 5.5% from ₹2.72 lakh crore allocated last year.

It appears that the government is relying more on public-private partnerships (PPP) for infrastructure investments. Finance Minister Nirmala Sitharaman announced that the respective ministries will develop a pipeline of projects to be undertaken under the PPP model.

“Each infrastructure-related ministry will come up with a 3-year pipeline of projects that can be implemented in PPP mode. States will also be encouraged to do so and can seek support from the IIPDF (India Infrastructure Project Development Fund) scheme to prepare PPP proposals,” Sitharaman said during her Budget speech.

Meanwhile, states have been provided support for infrastructure development. “An outlay of ₹1.5 lakh crore is proposed for 50-year interest-free loans to states for capital expenditure and incentives for reforms,” she added.