Budget 2026: Unlocking greater private capital in the infrastructure sector

By Mohammad Athar SaifInfrastructure serves as the backbone of the economy, enabling India to transition towards a $35 trillion economy by 2047 and align with the Viksit Bharat vision. Given the infrastructure sector’s multiplier impact, the Government has sustained its focus on capital expenditure this year. A 9% increase in capex to ₹12.22 lakh crore, alongside an 11% rise in effective capex to ₹17.15 lakh crore, sends a strong and deliberate signal to the market regarding the durability of India’s infrastructure push.Building on this strong foundation, the Budget proposed certain institutional reforms for delivering a powerful push to the infrastructure sector. The proposed establishment of an Infrastructure Risk Guarantee Fund (IRGF) will support projects in de-risking the award-to-commercial operation date (COD) phase, improve the bankability of infrastructure projects, and enable quick financial closure. Similar institutions in countries such as Indonesia and South Korea have enabled the mobilisation of private debt at scale and reduced the cost of capital for developers. To tap into the economic strength facilitated by the agglomeration of cities, the Budget has set aside ₹5,000 crore for each city's economic region over the next five years. These funds will be deployed through a challenge‑based approach, with financing linked to reforms and measurable outcomes rather than mere spending. Alongside this, the Budget proposes a higher incentive of ₹100 crore for any single municipal bond issuance exceeding ₹1,000 crore, while the AMRUT scheme will continue to support smaller and mid‑sized cities by incentivising bond issuances of up to ₹200 crore. Together, these measures could nudge municipalities towards tapping commercial markets at lower costs, helping them finance the infrastructure requirements that come with rapid urbanisation.To strengthen the pipeline for asset monetisation, the Budget has leaned on tried‑and‑tested instruments such as Real Estate Investment Trusts (REITs) to monetise revenue‑generating real estate held by Central Public Sector Enterprises (CPSEs)—particularly at prime locations—without completely diluting the ownership. This approach offers a practical way to unlock latent value and recycle capital, allowing proceeds to be channelled back into priority areas of public investment. In this context, the identification of REIT-able properties would be important, especially since many Government office buildings would need significant refurbishment before they can attract serious private sector interest.The Government’s emphasis on a robust budgetary outlay for the transport sector demonstrates a clear commitment to reducing the logistics costs and fostering operational efficiency. The development ofDedicated Freight Corridors ( DFCs), national waterways, and high-speed railways will further contribute to the initiatives undertaken by the Government. India is currently at a pivotal moment in its economic journey, where strategic and sustained development of the infrastructure sector holds the key to unlocking its full potential. The timely and effective execution will matter just as much, if the country is to fully seize this opportunity. Initiatives such as the IRGF can meaningfully recalibrate the infrastructure debt market, but their impact will ultimately depend on how well the institutional framework is designed and how quickly the fund is operationalised.(Mohammad Athar Saif is Partner and Leader CP&I and Industrial Development, PwC India. With inputs from Haider Saikh - Associate Director Infrastructure, PwC India)