The Centre’s significant capital investments in infrastructure projects, including highways, railways, and power, alongside critical sectors like defence, are expected to boost India’s economic growth in FY 2025-26 and beyond, according to a report by Prabhudas Lilladher (PL).
The government allocated ₹11.1 lakh crore for infrastructure in the FY 2024-25 budget, with expectations of an even higher allocation in the upcoming FY 2025-26 budget. These investments aim to stimulate demand and support long-term growth, the report highlights.
The forthcoming budget is anticipated to focus on driving economic recovery by boosting middle-class spending, especially as inflation has eased. The report’s optimism is reinforced by industrial growth reaching a six-month high of 5.2% in November, up from 3.5% in October, according to the Ministry of Statistics.
Government Spending on Major Infrastructure Projects to Fuel India’s Development in FY26: Report
India is set to witness a surge in infrastructure development in FY26, driven by increased government spending on major projects across transportation, energy, and urban development. According to a recent report, the central and state governments are expected to allocate substantial funds to boost economic growth, enhance connectivity, and create employment opportunities.
The government’s focus remains on large-scale infrastructure projects such as highways, railways, airports, and smart cities. The National Infrastructure Pipeline (NIP), with an investment target of ₹111 lakh crore by 2025, continues to be a key driver, accelerating projects in roads, metro rail, and renewable energy. The upcoming budget is expected to prioritize capital expenditure, further strengthening India’s economic momentum.
One of the critical areas of investment will be transportation. The Ministry of Road Transport and Highways plans to expand expressways and national highways, aiming for faster logistics and reduced travel time. Similarly, the Indian Railways is advancing its modernization plans, including high-speed rail corridors, station redevelopment, and electrification.
Urban infrastructure will also see a boost, with increased allocations for metro projects, smart city initiatives, and housing schemes. Additionally, the government is likely to invest heavily in green energy, supporting solar and wind power projects to meet India’s sustainability goals.
Experts believe that continued public investment will attract private sector participation, further accelerating growth. With robust government spending, FY26 is poised to be a transformative year for India’s infrastructure landscape, setting the stage for long-term economic expansion and global competitiveness.
The government’s focus remains on expanding the national highway network, with multiple expressways and corridor projects planned under the Bharatmala Pariyojana. Rail infrastructure is also receiving a significant, with dedicated freight corridors, metro expansions. The Indian Railways is expected to benefit from substantial budgetary allocations aimed at modernizing stations, electrifying tracks, and increasing freight capacity.
In addition to transport infrastructure, investments in smart cities, urban mobility, and energy projects will further strengthen India’s growth trajectory. The expansion of renewable energy infrastructure, including solar and wind power, aligns with the nation’s sustainability goals while enhancing energy security. The government is also prioritizing digital infrastructure and industrial corridors to attract foreign investments and boost manufacturing.
According to experts, increased public spending on infrastructure will have a multiplier effect on the economy, stimulating demand across sectors such as steel, cement, and construction equipment. Private sector participation is also expected to rise, further accelerating project execution.
With infrastructure development at the core of India’s economic strategy, the government’s enhanced spending in FY26 is set to improve living standards, create jobs, and strengthen India’s position as a global economic powerhouse. The sustained push in infrastructure is expected to drive long-term growth and make India a more competitive destination for global investments.
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