Finance Minister Nirmala Sitharaman, on Saturday, February 1, tabled the Union Budget for the year 2025-26. Similar to last year, the budget maintains its focus on infrastructure-driven growth, outlining the government’s fiscal priorities and economic roadmap for the upcoming year.
Earlier, the Economic Survey was tabled in the Parliament. It projected a growth rate of 6.3-6.8% for the coming financial year. It further emphasizes “Viksit Bharat 2047“, envisioning India as a developed nation by 2047, the centenary of our independence. This would entail sustained economic growth of close to 8% every year for at least a decade.
Also Read: Economic Survey 2024-25: Key Insights and Future Outlook
Total Expenditure and Economic Highlights
The Union Budget 2025-26 details a total expenditure of 50.65 INR Lakh-Crore, with a capital expenditure of 11.2 INR Lakh-Crore. Furthermore, the Budget identifies four key pillars to drive the nation’s economic momentum – agriculture, MSMEs, investment, and exports. It also aims to initiate transformative reforms in Taxation, Power Sector, Urban Development, Mining, Financial Sector, and Regulatory Reforms to augment India’s growth potential and global competitiveness.
Expenditure on Major Items (INR-Crore)
Building & Urban Development
Key Announcements for Building & Urban Development in Union Budget 2025
- SWAMIH Fund-2: 15,000 INR-Crore for fast-tracking the completion of 1 lakh dwelling units through blended finance.
- Urban Challenge Fund: 1 INR Lakh-Crore to implement the proposals for ‘Cities as Growth Hubs’, ‘Creative Redevelopment of Cities’ and ‘Water & Sanitation’.
- Tourism for employment-led growth: During the Union Budget 2025, the government also announced its focus on developing top 50 tourist destination sites, partnering with states. Hotels in these destinations will be included in the Harmonized Infrastructure List. To facilitate employment-led growth, the budget highlighted performance-linked incentives for states. It further emphasizes improving ease of travel and connectivity to tourist destinations
- National Framework for GCC: A national framework will be formulated as guidance to states for promoting Global Capability Centers in emerging tier 2 cities. This will suggest 16 measures for enhancing the availability of talent and infrastructure, building bylaw reforms, and mechanisms for collaboration with industry.
- National Centers of Excellence for Skilling: 5 National Centers of Excellence for skilling will be set up with global expertise and partnerships. These will further equip the youth with the skills required for ‘Make for India, Make for the World‘ manufacturing.
- Expansion of Capacity in IITs: The government will expand infrastructure in the five IITs established after 2014, creating facilities to accommodate 6,500 more students.
- Center of Excellence in AI for Education: A new Center of Excellence in Artificial Intelligence for education will be established with a total investment of 500 INR-Crore, further enhancing AI-driven learning initiatives.
How these announcements will shape the Building Construction Sector
The Union Budget 2025 prioritizes urban renewal and affordable housing, driving large-scale redevelopment in metro and Tier II cities. The Urban Challenge Fund will support integrated residential, commercial, and transit-oriented developments. Meanwhile, SWAMIH Fund-2 will speed up stalled mid-income and affordable housing projects. This will revive developer interest and reduce the backlog in residential real estate.
Expanding IITs and establishing new skill centers will create demand for institutional buildings, research facilities, and student housing. These projects will transform nearby areas into construction hubs.
Including hotels in the top 50 tourist destinations under the Harmonized Infrastructure List will help hospitality developers secure long-term financing at lower interest rates. With increased government support for tourism, hotel construction will rise, especially in heritage cities, tourist hubs, and medical tourism destinations.
Infrastructure Sector
Key Announcements for the Infrastructure Sector in Union Budget 2025
- Support to States for Infrastructure: The government will provide 1.5 INR Lakh-Crore in 50-year interest-free loans to states for capital expenditure. States will also receive incentives for implementing reforms.
- Public Private Partnership in Infrastructure: Infrastructure ministries will develop a 3-year pipeline of PPP projects. States are encouraged to follow suit and can seek support from the India Infrastructure Project Development Fund (IIPDF).
- Jal Jeevan Mission: Union Budget 2025 extends JJM until 2028 to ensure 100% coverage of clean drinking water. The initiative will receive an enhanced total outlay to accelerate implementation.
- UDAN: The scheme has connected 88 airports and launched 619 operational routes. Building on this success, the government will introduce a modified UDAN scheme to improve regional connectivity. The upgraded initiative will further add 120 new destinations and serve 4 crore passengers over the next 10 years.
- Infrastructure Development in Bihar: The government plans to develop greenfield airports and provide financial support for the Western Koshi Canal ERM Projects to meet Bihar’s future needs.
- Bilateral Investment Treaties (BITs): Following the Interim Budget 2024, India signed BITs with two countries to boost foreign investment. To further this goal, the government will revamp the current BIT model, making it more investor-friendly in line with the ‘First Develop India’ vision.
- Asset Monetization Plan 2025-30: Building on the success of the 2021 Asset Monetization Plan, the government will launch a 10 INR Lakh-Crore plan for 2025-30. Regulatory and fiscal measures will be refined to maximize capital reinvestment in new projects.
Allocation for Major Infrastructure Schemes (INR-Crore)
| Name of the Scheme | BE2024-25 | RE2024-25 | BE2025-26 |
| Jal Jeevan Mission (JJM) / National Rural Drinking Water Mission | 70,163 | 22,694 | 67,000 |
| Pradhan Mantri Awas Yojna Grameen (PMAY-G) | 54,500 | 32,426 | 54,832 |
| Pradhan Mantri Awas Yojna (PMAY)-Urban | 30,171 | 13,670 | 19,794 |
| Pradhan Mantri Gram Sadak Yojna | 19,000 | 14,500 | 19,000 |
| AMRUT (Atal Mission for Rejuvenation and Urban Transformation) | 8,000 | 6,000 | 10,000 |
| Pradhan Mantri Awas Yojana Urban 2.0 (PMAY-U 2.0) | – | 1,500 | 3,500 |
| Scheme for Industrial Housing (MoHUA) | – | – | 2,500 |
Budget Allocation for Key Infrastructure Ministries (INR Crore)
Capital expenditure for infrastructure is projected to remain steady at 2.7 INR-Trillion for Roads and 2.5 INR-Trillion for Railways. However, there is an increased allocation in Union Budget 2025-26 for the Ministry of Housing and Urban Affairs.
| Capital Expenditure | Total Expenditure | |||||||
| BE 2024-25 | RE 2024-25 | BE 2025-26 | Y-o-Y Change (RE) | BE 2024-25 | RE 2024-25 | BE 2025-26 | Y-o-Y Change (RE) | |
| Ministry of Road Transport and Highways | 272,241 | 272,481 | 272,241 | -0.1% | 278,000 | 280,519 | 287,333 | 2.4% |
| Ministry of Railways | 252,000 | 252,000 | 252,000 | 0.0% | 255,393 | 255,348 | 255,445 | 0.0% |
| Ministry of Housing and Urban Affairs | 28,628 | 31,662 | 37,623 | 18.8% | 82,577 | 63,670 | 96,777 | 52.0% |
How these announcements will shape the Infrastructure Sector
A major highlight of the budget is the allocation of 1.5 INR Lakh-Crore in interest-free loans to states. This funding will stimulate regionally-driven infrastructure projects, including highways, metro systems, airports, and water supply systems. By offering states greater financial flexibility, the government is decentralizing infrastructure development, ensuring growth extends beyond metro cities to emerging industrial and urban centers. The 3-year PPP pipeline will encourage private investment, making large-scale projects more feasible by combining public and private sector resources. Furthermore, the Asset Monetization Plan 2.0, targeting 10 INR Lakh-Crore, will unlock funds from existing assets. This will enable the construction of new expressways, smart logistics zones, and urban transit corridors.
The Jal Jeevan Mission has been extended until 2028 with an enhanced outlay of 67,000 INR-Crore, which is 195% higher than the revised estimates of 2024-25. This extension will drive significant construction activity, particularly in rural and urban water supply projects.
The revamped UDAN scheme will improve air connectivity and fuel the construction of airport terminals, aviation support infrastructure, and real estate developments around airport cityside zones. Similarly, new greenfield airport projects—such as those planned for Bihar—will lead to the development of multi-modal transport nodes, spurring real estate and commercial activity in the surrounding areas.
Industrial Sector
Key Announcements for the Industrial Sector in Union Budget 2025
- Warehousing Facility for Air Cargo: The government will upgrade infrastructure and create warehousing facilities for air cargo, particularly for high-value perishable horticultural produce.
- Urea Plant in Assam: A urea plant with an annual capacity of 12.7 Lakh Metric Tonnes will be established at Namrup, Assam.
- Focus Product Scheme for Footwear & Leather Sectors: The Union Budget 2025 introduces a scheme to enhance the productivity, quality, and competitiveness of India’s footwear and leather sector. This will generate 4 INR Lakh-Crore in turnover and 1.1 INR Lakh-Crore in exports. Moreover, the initiative is expected to create 22 lakh jobs. The government’s support will significantly boost the sector’s growth and help improve its manufacturing capabilities.
- Measures for the Toy Sector: A scheme will foster the creation of high-quality, innovative, and sustainable toys, positioning India as a global hub for toys.
- Support for Food Processing: The government will establish a National Institute of Food Technology, Entrepreneurship, and Management in Bihar, advancing food processing capabilities.
- Manufacturing Mission – Furthering “Make in India”: A National Manufacturing Mission will support small, medium, and large industries to further the “Make in India” initiative.
PLI Scheme Allocation (INR-Crore)
The outlay for PLI schemes increased by over 108% in FY 2025-26 (Budget estimates BE), reaching 19,482.58 INR-Crore, up from 9,360.36 INR-Crore in FY 2024-25 (Revised estimates RE). The highest allocation increases are in PLI schemes for textiles, battery cell and storage technology, and automobiles.
| PLI Scheme | BE2024-25 | RE2024-25 | BE2025-26 |
| Production Linked Incentive Scheme (PLI) (MeiTY) | 6,200 | 5,777 | 9,000 |
| Production Linked Incentive (PLI) Scheme for Automobiles and Auto Components | 3,500 | 347 | 2,819 |
| Production Linked Incentive Schemes (Dept. of Pharmaceuticals) | 2,143 | 2,151 | 2,445 |
| Production-Linked Incentive Scheme for Food Processing Industry | 1,444 | 700 | 1,200 |
| Production Linked Incentive (PLI) Scheme for Textiles | 45 | 45 | 1,148 |
| Production Linked Incentive Scheme (PLI) for White Goods (ACs and LED Lights) | 298.02 | 213.57 | 444.54 |
| Production linked Incentive for Large Scale Electronics Manufacturing | 6,125 | 5,747 | 8,885 |
| Production Linked Incentive for IT Hardware | 75 | 30 | 115 |
| Production Linked Incentive (PLI) Scheme for National Programme on Advanced Chemistry Cell (ACC) Battery Storage | 250 | 15.42 | 155.76 |
How these announcements will shape the Industrial Sector
The government’s focus on industrial expansion in the Union Budget 2025 will drive significant construction activity in manufacturing hubs, logistics parks, and industrial corridors. The National Manufacturing Mission will stimulate the growth of small, medium, and large-scale industries. This will further lead to the creation of new industrial parks, factory units, and R&D centers.
The Focus Product Scheme for the Footwear and Leather sector is set to boost manufacturing competitiveness. Consequently, it will establish new production facilities and industrial clusters. Additionally, the new National Institute of Food Technology in Bihar will encourage the development of food processing infrastructure. It will also attract private investments in food parks, cold storage, and logistics facilities. These efforts will strengthen the food processing sector and foster regional economic growth.
A major area of expansion will be in warehousing and air cargo infrastructure. The government’s commitment to upgrading logistics facilities, particularly for high-value perishable goods, will lead to the development of modern storage and transportation hubs.
Conclusion
In conclusion, the Union Budget 2025-26 lays the foundation for transformative growth in India’s construction sector. By increasing allocations to infrastructure, housing, and urban development, the government aims to accelerate progress across key areas. Additionally, the budget emphasizes sustainability and technology-driven construction, which can enhance efficiency, attract private investments, and generate employment. While the budget introduces significant opportunities, its real impact will depend on effective policy execution and collaboration between stakeholders. With the right execution, India’s construction sector is poised for significant expansion, shaping the country’s economic and urban future.
For more detailed insights, you can access the complete document BUDGET 2025-2026 NIRMALA SITHARAMAN
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