Rajkiran Rai G, Managing Director, National Bank for Financing Infrastructure and Development 

To achieve its vision of becoming a developed nation (Viksit Bharat) by 2047, India has implemented a strategic framework of policy reforms, targeted sectoral measures, and robust fiscal and monetary support. By adhering the fiscal glide path post Covid, the Government has built credibility for prudence, fiscal marksmanship. This multifaceted approach is designed to transition the economy toward a sustainably higher growth trajectory.

A cornerstone of this transition is the unprecedented expansion and modernization of national infrastructure. The expenditure on infrastructure is estimated to have growth multiplier of three (3), making it an obvious play for raising potential growth. By prioritizing transport, energy, urban infra, and digital networks, India has significantly enhanced connectivity, alleviated long-standing capacity constraints, and optimized logistical efficiency. These advancements have, in turn, generated substantial spillovers for national productivity and economic output.

Crucially, this phase of development is defined not only by the accelerated pace of asset creation but also by a paradigm shift toward integrated, end-to-end infrastructure planning.

Union Budget 2026-27 takes this holistic approach forward by enhancing capital expenditure allocation to ₹ 12.2 trillion, though with a change in sub-sectoral focus to multi-modal connectivity, dedicated freight corridors, high speed rail corridors, coastal cargo promotion, national waterways, viability gap funding (VGF) for manufacturing Seaplanes, tourism infra, among others. The change in emphasis is only expected as economy matures with basic infrastructure in place and aspirational surge for quality over quantity.

Most satisfying is the nudge on urban infrastructure, empowering urban local bodies (ULBs) in Tier 2 and beyond cities with right administrative capabilities, and incentives to augment resources from market-based financing avenues. The Budget has broadened the incentives eligible for municipal bond issuance to Rs 100 crore for issuance sizes of Rs 1000 crores and above. The extant AMRUT scheme to remain in vogue, creating transitioning structure for ULBs attempting quality infrastructure at scale.

The proposal to set-up ‘Infrastructure Risk Guarantee Fund’ to mitigate execution risks in projects that deter lenders from infrastructure sector is welcome enabler. Default rate in infrastructure is at historical lows, and both borrowers and lenders have clean balance sheets. With this guarantee fund, the cost of capital for infrastructure is likely to come down further, inviting public-private partnership (PPP) in infrastructure.

Likewise, asset monetisation via REITs will further augment capacity of central public sector enterprises (CPSEs), having large tracts of real-estate worth of commercial development. This would be particularly helpful for CPSEs having lands in central urban spheres, giving pace to capital recycling. The proposal on market-making in corporate bond and derivative instruments is step in right direction. The instrument like Total Return Swap (TRS) on corporate bond will help better pricing of risk and encourage long tenor issuances as the corporate bond market attains meaningful heft in resource flow to commercial sector. Further, tax relief on Data Centres will boost this emerging segment.

Given the long gestation period of infrastructure projects, the conventional source of funds like commercial banks remain a misfit due to inherent asset liability mismatches. Resultantly, infrastructure lending’s share in non-food credit has fallen sharply from 14.4% in FY15 to 7.7% in FY25 and further to 7.2% (₹14.0 trillion) by end-November 2025. Although banks’ infrastructure credit grew 2.8% during April–November 2025, outpacing last year’s 1.3%, it lagged overall non-food credit growth (6.8%). NBFC-IFCs now dominate infrastructure financing, with a ₹19.4 trillion loan book growing 24.8% y/y as of end-September 2025. Given the changed resource flow, proposal to restructure public sector NBFCs like REC and PFC along with reviewing banking sector for aligning to next phase of growth is indeed an imperative.

Importantly, in financial year 2024-25, out of the ₹ 35 trillion of household financial savings, more than one third (~₹ 13.3 trillion) was allocated to Insurance, Provident and Pension (IPP) funds reflecting growing investor’s appetite for non-bank assets. Further, with the AUM of IPP investors currently at ~ ₹ 120 trillion, and growth rate exceeding India’s nominal GDP’s growth, they offer a reliable source of patient capital that infra development needs. Therefore, channelization of these funds via capital markets and deepening of bond markets assumes paramount significance.

National Bank for Financing Infrastructure and Development was conceptualized as a specialised development financier for infrastructure in Union Budget FY2021-22. Founded in April 2021, and operationalised in December 2022, the institution has ably galvanised resource flow to infrastructure sector—with sanctioned loan-book crossing₹ 3 trillion and disbursements crossing ₹ 1 trillion as end December 2025. Besides, it mobilised about ₹ 0.5 trillion long term capital from bond markets, making it well positioned to offer long tenor loans. Over three-fourth of institution’s lending has tenor of 15-years and above, a space commercial banks have been ill positioned to serve. As proposed in last year Union Budget, the institution has unveiled partial credit enhancement (PCE) product to match long-term users of funds with long-term suppliers of capital.

Going forward, India would require a blend of investment, infusion and innovation to propel its growth story ahead. This budget address all the boxes by incentivising investments, both foreign and domestic, technology upgradation for enterprises and cutting-edge innovation. It builds on a series of already successful interventions from the Government over the years.

Rajkiran Rai G, Managing Director, National Bank for Financing Infrastructure and Development

Published on February 2, 2026