Union Budget 2025-26 has announced four engines of development – Agriculture, MSMEs, Investment and Exports. Investment consists of two components (i) investment in people and (ii) investment in the economy.
Under the investment in the economy the Union Government has announced several measures to strengthen the infrastructure and the following are the major measures.
- States are proposed to receive 50-year interest-free loans with an outlay of Rs. 1.5 lakh crore for capital expenditure and incentives for reforms.
- Second Asset Monetization Plan (2025-30) to unlock Rs. 10 lakh crore for new projects.
- Jal Jeevan Mission to be extended till 2028 with an increased total outlay. In Budget 2025-26 Rs. 67,000 Crs to be allocated.
- Rs. 1 lakh crore Urban Challenge Fund to implement the proposals for ‘Creative Redevelopment of Cities’, ‘Cities as Growth Hubs’ and ‘Water and Sanitation’ announced in the previous Budget (i.e., 2024-25).
- Nuclear Energy Mission to develop 100 GW of nuclear energy by 2047, with Rs. 20,000 crore allocated for Small Modular Reactors (SMRs) to be operational by 2033.
- Maritime Development Fund to provide long-term finance for the sector with a size of Rs. 25,000 crore.
- The Shipbuilding Financial Assistance Policy will be revamped to include Credit Notes for shipbreaking in Indian yards and changes in the Shipbuilding Clusters.
- A modified UDAN Scheme will be launched to connect 120 new destinations, carrying 4 crore additional passengers in 10 years.
- Greenfield airports will be developed in Bihar. Along with that, there will be an expansion of Patna and Bihta airports.
- Western Koshi Canal ERM project that will benefit 50,000 hectares of land under cultivation in Bihar.
- SWAMIH (Special Window for Affordable and Mid-Income Housing) Fund 2, which has a size of Rs. 15,000 crore, will fasten the completion of 1 lakh pending housing units.
- Top 50 tourist destinations to be developed in association with states.
- NaBFID (National Bank for Financing Infrastructure and Development) to launch ‘Partial Credit Enhancement Facility’ for supporting corporate bonds for infrastructure projects.
- The existing Bilateral Investment Treaties (BIT) model of 2024, signed between two countries is now being updated to the effect of long-term foreign investment through ‘First Develop India’ approach.
- A National Geospatial Mission to be launched to develop foundational geospatial data and infrastructure. (Rs. 100 Crs to be allocated in Budget 2025-26). Using PM Gati Shakti, this Mission will facilitate modernization of land records, urban planning, and design of infrastructure projects. PM GatiShakti is a transformative approach for economic growth and sustainable development. The approach is driven by 7 engines, namely: Railways, Roadways, Ports, waterways, Airports, Mass Transport, Logistics Infrastructure- for economic transformation, seamless multimodal connectivity and logistics efficiency.
- Urban challenge fund of Rs. 1 lakh Cr announced to implement the proposals for Cities as Growth Hubs, Creative redevelopment of Cities, and water Sanitation, allocation of Rs. 10,000 Crs proposed in 2025-26 Budget.
- Nuclear Energy Mission for research and development of Small Modular reactors (SMRs) with an outlay of Rs. 20,000 Crs to be setup, 5 indigenously developed SMRs to be operational by 2033.
- Maritime Development fund with a corpus of Rs. 25,000 Crs to be setup, with 49% contribution by the Union Government and the balance from the ports and private sector.
The above initiatives announced in Budget 2025-26 are expected to boost the infrastructure development in the country.
Indian Railways has operationalized over 90 percent of its Dedicated Freight Corridor (DFC), covering a distance of over 2,800 kilometers. The establishment of Dedicated Freight Corridors, or DFCs, is expected to lower logistics costs through the use of higher axle load trains, Double Stack Container trains (DSC), and enhanced access to the Northern hinterland via Western Ports. Freight corridors are broad-gauge high-capacity railway corridors exclusively meant for the transportation of goods and commodities. Bharat has the third largest railway network in the world with 92,952 KMs length. This initiative is anticipated to stimulate the development of new industrial hubs and Gati Shakti Cargo Terminals.
Bharat’s freight movement share category wise
| Road | 65% |
| Rail | 31% |
| Shipping | 3% |
| Air | 1% |
Major industrial hubs in our country are inland and not all connected with ports, which dominate logistics route. DFCs are expected to reduce India’s logistical costs, promote environmental sustainability, and stimulate the development of new industrial hubs and cargo terminals.
The Sagarmala programme is the flagship programme of the Ministry of Ports, Shipping and Waterways (approved by Union Cabinet in March, 2015) to promote port-led development in the country through harnessing India’s 7,500 km long coastline, 14,500 km of potentially navigable waterways and strategic location on key international maritime trade routes. As a part of Sagarmala Programme, around 839 projects at an estimated cost of around Rs. 5.5 lakh crore have been identified for implementation. These projects are implemented by Central Ministries, IWAI (Inland Waterways Authority of India), Indian Railways, NHAI, State Government and Major Ports etc. As of now, 272 projects have been completed, which account for an investment of approximately Rs. 1.41 lakh crores.
DFCs and Sagarmala Programme together are expected to bring significant improvement in the logistics development in our country and give a fillip to manufacturing, domestic and global trade.
While all the above measures are good initiatives, the outcomes will depend on the timely completion of these projects. Ministry of Statistics and Programme Implementation (MOSPI) which monitors the central sector infrastructure projects of Rs.150 Crs and above says as many as 449 central sector infrastructure projects, each entailing an investment of Rs 150 crore or above, were hit by cost overrun of more than Rs 5.01 lakh crore in March 2024. The total original cost of these projects was Rs. 26,87,535.69 Crs (1873 projects) but their anticipated completion cost is expected to be Rs. 31,88,859.02 Crs !. While 449 projects reported cost overrun, 779 projects reported time overrun. The point to be noted is that if the time value of money is factored in the delayed projects, the cost overruns will be much higher than what is estimated currently as above.
It is high time the government pays attention to address the time and cost overruns in central sector infrastructure projects lest the lion’s share of budgetary allocation will only go towards cost overruns but the projects execution will get delayed inordinately. In this regard the author suggests few guidelines as under:
To start with for the project size of Rs. 500 Crs and above, the concerned government agencies and regulators should declare upfront the timelines for according their approvals, failing which it would be construed as deemed approvals (by default), assuming that the requirements for such approvals are duly met.
States where the above-mentioned central sector projects are under execution should have a single window clearance mechanism.
The government may devise a suitable mechanism so that the concerned contractor of the project and the lead bank or second lead bank of the consortium are part of the PMG (Project Monitoring Group) proceedings.
Project executing agencies should be mandated to report the revised cost estimates and commissioning schedules for the delayed projects in a time bound manner, failing which certain penalties may be imposed on them.
Banks and FIs financing the projects should be mandated to accord their approvals in a time bound manner, failing which the PMG to escalate the same to the Board of Directors of the banks concerned.
Adequate capacity building initiatives to be done on an ongoing basis for all the stake holders in order to develop the competencies needed to handle the projects efficiently.
Conclusion
The measures announced in the Union Budget 2025-26 for infrastructure development are a welcome sign. However, the government should pay greater attention to the execution of the central sector projects and timely completion of the same to avoid the time and cost overruns which are becoming a white elephant. Project monitoring mechanism to be strengthened and all concerned stakeholders should be actively involved in the Project Monitoring Group to enhance the overall outcomes.
