NEW DELHI: The Union Budget 2026–27, presented on Sunday, reaffirmed the Centre’s focus on developing infrastructure in Tier II and Tier III cities with populations of over five lakh, stating that these cities have expanded into key growth centres.
Presenting the Budget, Union Finance Minister Nirmala Sitharaman said cities are India’s engines of growth, innovation and opportunity.
To strengthen urban-led development, the government has proposed an allocation of ₹5,000 crore per City Economic Region (CER) over five years.
The funds will be deployed through a challenge mode, backed by a reform-cum-results-based financing mechanism, to implement city-specific development plans.
“We shall now focus on Tier II and Tier III 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,” Sitharaman said.
As part of efforts to promote environmentally sustainable passenger transport, the government will develop seven high speed rail corridors between major urban centres, described as ‘growth connectors’.
These corridors will link Mumbai–Pune, Pune–Hyderabad, Hyderabad–Bengaluru, Hyderabad–Chennai, Chennai–Bengaluru, Delhi–Varanasi and Varanasi–Siliguri.
In her Budget speech, Sitharaman noted that over the past decade the government has undertaken several initiatives to significantly enhance public infrastructure, including the introduction of new financing instruments such as Infrastructure Investment Trusts (InVITs) and Real Estate Investment Trusts (REITs), as well as institutions like the National Investment and Infrastructure Fund (NIIF) and the National Bank for Financing Infrastructure and Development (NABFID).
“We shall continue to focus on developing infrastructure in cities with over five lakh population (Tier II and Tier III), which have expanded to become growth centres,” she added.
Highlighting the rise in public capital expenditure, the finance minister said it had increased manifold from ₹2 lakh crore in 2014–15 to ₹11.2 lakh crore in the Budget Estimate for 2025–26.
“In FY 2026–27, I propose to increase it to ₹12.2 lakh crore to continue the momentum,” she said.
To promote environmentally sustainable movement of cargo, Sitharaman proposed a new Dedicated Freight Corridor connecting Dankuni in the east to Surat in the west.
She also announced plans to operationalise 20 new National Waterways over the next five years, beginning with National Waterway 5 in Odisha.
This will connect the mineral-rich regions of Talcher and Angul and industrial centres such as Kalinga Nagar with the ports of Paradeep and Dhamra.
She further said that training institutes will be set up as Regional Centres of Excellence to develop the required manpower for these initiatives. These centres will benefit youth across the waterways network by enabling them to acquire relevant skills and training.