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Budget FY27 Infuses Hope into Infrastructure After Two Lean Years

The Union Budget for FY27 signals a potential rebound for infrastructure, with total capital expenditure rising 12% over the previous year's revised estimate. The budget shows a clear prioritisation of transport, with railway and road outlays increasing by 11% and 8% respectively. However, growth is uneven, with flat or declining allocations for sectors like NHAI, metro rail, water, and affordable housing. Analysts view the promised rebound cautiously, noting it relies on a low base and actual government spending, with asset monetisation becoming critical for long-term goals.

Key Points: FY27 Budget: Infrastructure Capex Sees 12% Rise, Says Nuvama

  • Total infra capex up 12% over FY26 RE
  • Railways and roads see 11% and 8% outlay hikes
  • NHAI, metro, water, housing outlays flat or down
  • Asset monetisation seen as key for long-term targets
  • Growth comes on a low base after FY26 underspend
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Union Budget FY27 gives hope to the infra space, after two disappointing years: Nuvama

Union Budget FY27 boosts total infrastructure capex by 12%, with focus on railways and roads, though growth is uneven across sectors, notes Nuvama.

"gives some hope to the infra space after two consecutive years of disappointment - Nuvama Research report"

New Delhi, February 2

The Union Budget for FY27 "gives some hope to the infra space after two consecutive years of disappointment," signalling a potential rebound in government spending, noted a Nuvama Research report on the recently announced Budget 2026.

"The Union Budget for FY27 can be construed as better than last year total infra capex budget is up 12% over FY26 revised estimate (RE) and 10% compared with FY26 budgeted estimate (BE)," the report said.

While the allocation suggests a recovery, the report noted that the growth comes on a low base after FY26 expenditures significantly undershot initial projections.

The fiscal plan shows a distinct prioritisation of transport networks, specifically railways and roads, which saw outlays rise by 11 per cent and 8 per cent respectively. The growth follows a period where these sectors remained largely flat.

The report noted that within the railway segment, the budget for civil construction, including new lines and gauge conversion, increased by 15 per cent, while rolling stock saw an 11 per cent rise. "Railways will have to come out with fresh wagon orders in FY27E to meet its procurement target of 32,000 wagons; this will be seen as positive for wagon players," the report stated.

However, the expansion is not uniform across all infrastructure verticals. Despite the overall increase in the road sector's budget, the allocation for the National Highways Authority of India (NHAI) remains flat compared to the previous year's budgeted estimate.

"While the increase in capex for the rail segment is positive, the muted capex outlay for the NHAI, metro rail, water, urban infra and affordable housing segments, etc is negative," the report noted.

The report stated that other critical areas, such as the water sector (including the Jal Jeevan Mission) and rural housing under PMAY-G, also saw relatively flat year-on-year outlays. Some segments faced outright reductions; the metro rail and affordable urban housing sectors recorded a 7-12 per cent decline in outlays, while the AMRUT scheme saw a 20 per cent decline.

The report highlighted that the Gross Budgetary Support rose 9 per cent to Rs 12.2 trillion, while internal and extra-budgetary resources grew by 12 per cent. "Given tepid spending in FY26, the FY27 budgetary allocation is much higher than FY26 (RE). This means there is potential for decent growth in expenditure in the coming fiscal due to a low base," the report said.

Given these mixed allocations, the research suggested that "asset monetisation would emerge as a critical catalyst for achieving long-term infra targets." Despite the promised rebound on a low base, the outlook remains cautious.

The Nuvama report stated that while "FY27BE promises a rebound, provided the government actually loosens the purse strings," the overall stance on the infrastructure space remains one of caution due to the inconsistent growth across different sub-sectors.

- ANI

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Reader Comments

P
Priya S
The report is right to be cautious. A 10-12% increase sounds good, but it's on a low base after two disappointing years. The flat allocation for NHAI and cuts in metro, water, and housing are worrying. We need balanced development, not just focus on railways.
R
Rohit P
As someone from a tier-2 city, the decline in AMRUT and urban housing outlays is disappointing. Clean water and affordable housing are basic needs. The budget seems to favor big-ticket transport projects over local urban infrastructure. Hope they reconsider.
M
Michael C
Interesting analysis. The emphasis on asset monetization as a catalyst is key. For sustained infra growth, efficient use of existing assets and private participation will be crucial. The mixed signals across sectors show the fiscal constraints.
S
Shreya B
Good to see focus on railways! New lines and more wagons will boost connectivity and logistics. But the report says "provided the government actually loosens the purse strings" – that's the real question. Will the funds be released and spent on time? Past record isn't great.
K
Karthik V
The 20% decline for AMRUT is shocking. Jal Jeevan Mission outlay is flat? In a country with water scarcity, this is not acceptable. Budget should reflect national priorities, not just political ones. This is a genuine criticism from a citizen who cares.

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