The 2025 Union Budget of India underscores the government’s focus on infrastructure as a catalyst for economic growth in the country. While, some experts are of the view that the budget’s flat infrastructure spending at Rs 11.2 lakh crores, is a relatively stagnant growth rate compared to previous years, others consider it a fairly large amount of money for infrastructure spend.
One of the standout initiatives is the targeted funds allocated to support projects under ‘Cities as Growth Hubs,’ ‘Creative Redevelopment of Cities,’ and ‘Water and Sanitation’, that will cover up to 25% of the cost of bankable projects, encouraging additional financing through bonds, bank loans, and public-private partnerships. The fund represents a shift from traditional top-down
urban planning to a competitive, project-based model, with an emphasis on public-private partnerships to foster innovation. However, execution challenges observed in past initiatives, such as the Smart Cities Mission, raise concerns about delays and fund management. If effectively implemented, it could strengthen urban governance by enhancing the autonomy and accountability of state and local bodies.
The 2025–26 Budget focuses on improving logistics infrastructure through investments in multimodal parks, aiming to reduce transportation costs and enhance market access for the construction materials sector. The emphasis on Production-Linked Incentive (PLI) schemes and infrastructure development indicates a positive long-term outlook.
According to Neeraj Bansal, Partner and Head India Global, KPMG in India, this year’s budget delivered several key announcements. While some sectors received direct support, others stand to benefit from a forwardlooking policy stance. He briefed. “To strengthen domestic manufacturing, the National Manufacturing Mission, stresses on EODB, MSME growth, employment generation and technology-driven competitiveness, all of which will unlock new market opportunities. The FM announced an Export Promotion Mission and setting up of a unified digital trade platform—Bharat Trade Net. The budget also had a lot for logistics and connectivity, key to improving export competitiveness. Besides, the National Geospatial Mission, under PM Gati Shakti, will provide private sector access to critical data and maps, strengthening overall infrastructure development. Such increased manufacturing and logistics push can have a ripple effect on industrial and warehouse leasing activity, creating demand for new storage, distribution and logistics facilities. The budget sets the direction for India’s manufacturing expansion, which is expected to have a multiplier effect on the economy. While the stage is set, execution will be key—after all, funds on paper must translate into faster implementation for tangible economic impact.”
BUDGET’S KEY INFRASTRUCTURE ALLOCATIONS
Maritime Development Fund
A fund of ?250 billion ($2.9 billion) has been established to support the shipbuilding and repair industry. The government will contribute 49% of the fund, with the remaining share sourced from ports and private sector investments. The initiative aims to reduce India’s reliance on foreign shipping carriers and, if implemented effectively, could enhance the country’s position as a maritime hub in South Asia, boosting employment and export capacity.
Asset Monetisation Plan
Asset monetization plays a crucial role in unlocking capital to support infrastructure development. Following the first Asset Monetization Plan launched in 2021, a second plan for 2025–2030 aims to generate Rs 10 lakh crore by repurposing existing assets to fund new infrastructure projects. Regulatory and fiscal measures will be adjusted to facilitate the plan’s implementation.
While asset recycling can enhance efficiency, it poses risks such as potential monopolies if not adequately regulated, underscoring the need for transparent bidding processes and a focus on long-term sustainability. If managed effectively, it could finance key infrastructure projects without adding to fiscal deficits, though public perception will hinge on the stewardship of national assets.
Power Sector Reforms
Aligned with other infrastructure initiatives, reforms in the power sector are aimed at improving operational efficiency and ensuring long-term sustainability. The budget outlines reforms to enhance electricity distribution and transmission systems. States will receive incentives to improve power infrastructure, focusing on reliability and efficiency. An additional borrowing provision of 0.5% of the Gross State Domestic Product (GSDP) will be available to states contingent on implementing these reforms.
Railway and Highway Development:
An allocation of Rs 2,55,445 crore has been made to the Ministry of Railways, representing 5.04% of total government expenditure. The funding will support new train services, modernization of over 1,000 stations, track electrification, and the expansion of the highspeed rail network.
Similarly, highway development plays a critical role in improving connectivity and supporting economic growth. The Ministry of Road Transport and Highways has been allocated Rs 2,87,333 crore, accounting for 5.67% of the total government budget. A significant portion of this funding will support the Bharatmala Pariyojana, a national highway development program aimed at improving road connectivity.
The Bharatmala program aims to enhance India’s logistics network, with the increased allocation indicating a continuation of this objective. However, past projects have faced delays due to land acquisition issues and environmental clearance hurdles, while the emphasis on highways risks overlooking the importance of rural road connectivity for inclusive development. If effectively implemented, improved highways could reduce logistics costs, promote trade, and strengthen regional connectivity, though execution efficiency and environmental sustainability remain critical challenges.
Logistics and Warehousing
In line with developments in highways and railways, initiatives in logistics and warehousing are essential for building an integrated supply chain network. Efficient supply chains have become a global focus post-COVID, with this fund aiming to reduce India’s logistics costs from 14% of GDP to match the global average of around 8%. However, without investments in digital infrastructure for real-time tracking and improved customs efficiency, physical warehousing alone may not address underlying challenges. If effectively combined with technology, the initiative could strengthen India’s competitiveness as a manufacturing hub under the Make in India program.
Industrial Development
Complementing infrastructure investments, industrial development initiatives seek to reinforce India’s manufacturing capabilities. A new scheme with an allocation of Rs 2,500 crore has been introduced to develop plug-and-play industrial parks. This initiative seeks to create investment-ready parks with comprehensive infrastructure to support manufacturing and export activities.
The budget proposes a National Manufacturing Mission to provide policy support, implement strategic roadmaps, and establish a governance framework for the manufacturing sector. The Department for Promotion of Industry and Internal Trade (DPIIT) has received a 64% budget increase, raising its allocation to Rs 13,145.06 crore to support this initiative.
IMPACT ON INDIAN REAL ESTATE
Budget 2025 places considerable emphasis on infrastructure development, which is anticipated to have a substantial impact on the Indian real estate sector. It has elicited varied responses from industry leaders and economic analysts, particularly concerning infrastructure development allocations. As per Suresh Kumar R, Managing Director, Allcargo Terminals Limited, “Integrating
India into the global value chain and developing a competitive logistics ecosystem is essential for sustained economic growth and advancing the vision of Atmanirbhar Bharat. The budget is expected to prioritize capital expenditure on physical and digital infrastructure, with a focus on port development to achieve a 10,000 MTPA capacity by 2047.”
He added, “Additionally, measures to boost export-import (EXIM) trade, such as leveraging existing port infrastructure, providing GST exemptions for containerized agricultural products, and promoting export hubs, can enhance India’s global competitiveness and attract investment.”
Rakesh Reddy, Director, Aparna Constructions, said, “The FY26 Budget emphasizes infrastructure-led growth however, key industry expectations, such as industry status for real estate, streamlined approvals, and enhanced liquidity for developers, remain unaddressed. Despite these gaps, there is optimism that future reforms will promote sustainable growth, improve housing accessibility, and support the ‘Housing for All’ vision.”
Pradeep Misra, Chairman & MD- Rudrabhishek Enterprises Limited (REPL) stated, “The Union Budget 2025–26 was crafted amid challenging macroeconomic conditions, with the finance minister aiming to balance sustainable growth, welfare initiatives, and employment generation. A strong focus on capital expenditure and infrastructure development is intended to drive GDP growth in the coming years.”
Yancharla Rathnakara Nagaraja, Managing Director, Ramky Infrastructure Limited added, “The 2025 Union Budget highlights Public-Private Partnerships (PPP) with a three-year project pipeline for each ministry, supported by the India Infrastructure Project Development Fund (IIPDF) to assist in project execution. It has introduced the second Asset Monetization Plan (2025–30) to unlock value from public assets. Urban development is supported through transportation improvements under the modified UDAN scheme and new airport projects in Bihar. Additionally, projects like the Western Koshi Canal ERM Project and private sector access to PM Gati Shakti data aim to enhance agricultural infrastructure and improve project efficiency.”
The initiatives outlined in the budget 2025 highlight the government’s integrated approach to fortifying India’s infrastructure. Giving the impact analysis Neetu Vinayek, Partner & Leader infrastructure Sector, Tax & Regulatory Services, EY states, “Key reforms, including the Asset Monetization Plan 2.0, a three-year PPP project pipeline and an overhaul of existing model of Bilateral Investment Treaties, are forward looking measures designed to draw private sector investment and boost government liquidity for funding new projects. Further, the initiative to launch National Framework for Global Capability Centers, alongside efforts to promote tourism with support from states and the private sector, is expected to lift the nation’s GDP and drive job creation. Overall, the proposals are designed to develop ‘India First’ ethos by attracting private sector investment, accelerating growth and creating skilled workforce.”
However, as per sceptics, the budget does not include targeted measures to support domestic manufacturing, particularly in addressing the rise in cement-based product imports, where interventions like higher import tariffs or incentives for local producers could have provided stronger support. Also, the emphasis on short-term relief measures, such as personal tax cuts aimed at boosting consumption, has led to debates about the balance between immediate consumption and sustainable development. Some analysts argue that while these tax cuts may provide a temporary boost to the economy, they fall short of addressing structural reforms necessary for sustained growth.
