Budget 2026: Infrastructure push to focus on Tier 2, Tier 3 cities—key announcements by FM Sitharaman

Finance Minister Nirmala Sitharaman, on Sunday, during her Union Budget 2026 speech, announced a sustained infrastructure push, particularly targeting cities with populations of over 5 lakh.

Declaring that Tier 2 and Tier 3 cities had expanded into "growth centres", the FM highlighted that public capital expenditure has grown "manifold" from ₹2 lakh crore in FY2014-15 to ₹11.2 lakh crore (budgeted estimate) for 2025-26.

The FM proposed increasing this allocation further, earmarking ₹12.2 lakh crore for public capex in FY2026-27 to “continue the momentum.”

“We shall now focus on Tier 2 and Tier 3 cities, and even temple-towns, which need modern infrastructure and basic amenities. This Budget aims to further amplify the potential of cities to deliver the economic power of agglomerations by mapping city economic regions (CER), based on their specific growth drivers,” the FM said.

To strengthen the confidence of private developers as part of the infrastructure push, Sitharaman proposed setting up an Infrastructure Risk Guarantee Fund to provide prudentially calibrated partial credit guarantee to lenders.

"I propose to accelerate recycling of significant real-estate assets of the CPSEs through the setting up of dedicated rights," she added.

She also said that the government would facilitate the setting up of professional institutions such as ICAI, ICSI, and ICMAI to design short-term, modular courses and practical tools to develop a cadre of ‘Corporate Mitras’, especially in Tier 2 and Tier 3 towns.

“These accredited para-professionals will help MSMEs meet compliance requirements at affordable costs,” FM Sitharaman said.

As part of the infra push, she also announced the setting up of dedicated freight corridors connecting Dankuni in the east to Surat in the West, and the operationalization of 20 new waterways over the next five years.

She also said that training institutes would be set up as regional centres of excellence for the "development of required manpower" for the proposed 20 new waterways.

"This will benefit youth in the entire stretch of the waterways to train and acquire skills," Sitharaman said.

She also announced the setting up of a ship repair ecosystem in Varanasi and Patna to cater to the inland waterways, new and old.

The FM also proposed the launch of a coastal cargo promotion scheme to incentivise a modal shift to increase the share of inland waterways and coastal shipping from 6% to 12% by 2047.

She also floated a proposal to incentivise the manufacture of indigenous seaplanes to promote last-mile connectivity and tourism.

Further, to support the infrastructure push, Sitharaman said, "A scheme for enhancement of construction and infrastructure equipment will be introduced to strengthen domestic manufacturing of high-value, technology-advanced CIE. This can range from firefighting equipment to lifts to tunnel boring machines."