(Commonwealth_India) India is preparing for a significant increase in its spending on railway modernization in the 2025/26 federal budget, with a more modest rise in allocations for road construction, according to government sources familiar with the ongoing discussions. The government, under the leadership of Prime Minister Narendra Modi, has made infrastructure development a central part of its economic agenda, especially in the post-pandemic era. Roads have been a major focus of this drive, given their role in spurring economic growth and improving connectivity. However, challenges related to the execution of road projects, particularly delays in land acquisition and the complexities involved in acquiring clearances for new road projects, may shift some attention toward the railway sector.
The upcoming budget is expected to see a notable increase in the budgetary allocations for the Ministry of Railways, potentially rising to between 2.9 trillion rupees and 3 trillion rupees, translating to roughly $33.5 billion to $34.7 billion. This marks a substantial rise from the previous year’s allocation of 2.55 trillion rupees, underlining the government’s commitment to modernizing the railway system and improving the nation’s transportation infrastructure. The Indian Railways, which operates one of the largest rail networks in the world with more than 68,000 kilometers of track, is set to receive a significant portion of the increased budget. The allocation will help fund several critical initiatives, most notably expanding high-speed train services, including the ambitious plan to introduce 400 Vande Bharat trains by March 2027. These modern, semi-high-speed trains are designed to significantly improve passenger services, reduce travel times, and boost operational efficiency. Additionally, the modernization will also focus on improving rail freight operations, which play a critical role in the transportation of goods across the country.
While the railway sector is set to receive a significant boost in funding, the road transport ministry is expected to see a more moderate budget increase of about 3% to 4%. This would bring the ministry’s total budget allocation to approximately 2.9 trillion rupees, or $34.7 billion. Over the past decade, the road transport ministry has seen a dramatic increase in funding, with its budget growing six-fold to reflect the government’s push to enhance the road network. India’s road infrastructure has expanded considerably, with the total length of the road network increasing by nearly 60% to over 146,000 kilometers. Despite this, the road ministry has faced some challenges in the past year, particularly with the implementation of new projects. This includes issues related to land acquisition for new roads and the delay of certain initiatives due to the national and state elections in 2024. In the first eight months of the fiscal year through November 2024, the road transport ministry had spent only 54% of its allocated budget, a sharp contrast to the railways’ ministry, which had already utilized 76% of its funding. This disparity in spending has raised concerns about the pace at which road projects are progressing.
Given these challenges, the road transport ministry is exploring alternative ways to supplement its funding, particularly through the monetization of existing assets. One such initiative includes selling toll collection rights to private firms and leveraging the sale of road assets to raise capital. The road ministry is aiming to generate up to 1 trillion rupees annually from such monetization efforts, which will help fund an ambitious expansion plan that includes the construction of 50,000 kilometers of high-speed roads in the years ahead. Despite these efforts, it is clear that the road ministry is not anticipating significant increases in its budget for the upcoming fiscal year, especially in the face of land acquisition and execution challenges.
As the government prepares to present the 2025/26 federal budget on February 1, much attention will be focused on the allocation of resources to the infrastructure sector. The shift in focus from roads to railways reflects a broader recalibration of priorities within the infrastructure development agenda. While roads remain a critical element in India’s growth story, railways are now seen as an increasingly important mode of transportation, both for passengers and freight. The expansion and modernization of Indian Railways are seen as essential for boosting economic productivity, enhancing regional connectivity, and fostering a sustainable transportation system.
The Indian government’s emphasis on infrastructure development is part of a broader strategy to fuel long-term economic growth. By investing in modern transportation networks, India aims to facilitate trade, reduce logistical costs, and improve the overall business climate. The transportation sector, including both roads and railways, plays a pivotal role in ensuring that goods and people can move efficiently across the country, which in turn supports economic activity. As the government moves forward with its infrastructure spending plans, much will depend on how effectively it can overcome the challenges related to land acquisition, project delays, and financing. The final details of the budget will provide greater clarity on how the Modi administration plans to address these challenges while driving forward its vision of modernizing India’s infrastructure to support sustained economic growth in the coming years.