New Delhi [India], 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.
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