Budget 2026 is expected to provide a measured boost to Indian Railways' infrastructure development, with capital expenditure projections indicating continued government commitment to rail modernisation while maintaining fiscal discipline.

Projected Capex Growth for FY27

The upcoming budget is anticipated to allocate ₹2.7-2.75 trillion for Indian Railways capital expenditure in FY27, marking a modest increase from the current allocation. This represents a conservative 2-4% growth over the existing ₹2.52 trillion, reflecting the government's approach of fiscal prudence combined with infrastructure prioritisation.

The government has established a policy-level commitment to maintain minimum annual railway capex of ₹2.5 trillion, providing a strong baseline for incremental growth and ensuring continuity in infrastructure development.

Strong Execution Momentum Drives Confidence

A key factor supporting the higher FY27 allocation is the impressive execution performance in FY26. Indian Railways is on track to utilise over 80% of its ₹2.52 trillion capex, translating to approximately ₹2.03 trillion spent by December 2025. This high utilisation rate demonstrates significant improvements in project planning, approval processes, and execution capabilities.

The strong execution momentum reduces concerns about underutilised funds and strengthens the case for increased allocations, as the government gains confidence in the railways' ability to effectively deploy capital.

Strategic Focus Areas for Investment

Capacity Expansion and Network Optimisation

With electrification nearing completion across much of the network, capital deployment is shifting toward capacity enhancement and congestion reduction. FY27 investments are expected to prioritise:

• New line construction
• Track doubling projects
• Gauge conversion initiatives
• Network optimisation for improved throughput

A particular emphasis will be placed on accelerating Dedicated Freight Corridors (DFCs), which are essential for improving freight movement efficiency, reducing logistics costs, and freeing up passenger capacity on existing routes.

Safety and Technology Upgrades

Safety improvements and technology adoption remain central to the capex strategy. Key investment areas include:

These investments aim to reduce accident risks while improving operational reliability through better systems and technology adoption.

Market Impact and Stock Implications

The projected capex increase is expected to benefit both public and private sector railway stocks. Public sector entities like IRCTC and Indian Railways Finance Corporation may attract investors seeking stable, predictable earnings from consistent government allocations.

Private sector players including Titagarh Wagons, Jupiter Wagons, and Texmaco Rail could benefit from higher growth potential driven by:

• Technology adoption projects
• Rolling stock orders
• Station modernisation initiatives
• Freight corridor development

Railway Network Performance Overview

Indian Railways operates one of the world's largest rail networks, with revenues of approximately ₹2.7 lakh crore in FY25 and serving over 7 billion passengers annually. The network spans more than 35,000 km of track and continues expanding through strategic initiatives including new train deployments and high-speed corridor development.

Long-term investment plans target approximately ₹16.7 lakh crore by 2031 for comprehensive network enhancement, including freight corridor improvements, track electrification, station redevelopment, and operational efficiency upgrades.

The Budget 2026 allocation represents a continuation of India's infrastructure modernisation strategy, balancing growth ambitions with fiscal responsibility while ensuring sustained progress in railway network development.

The Indian government has announced an ambitious clean energy transition plan for the railways sector, focusing on the large-scale adoption of battery and alternative fuel-powered train engines. This strategic initiative represents a significant step towards sustainable transportation infrastructure across the country's extensive railway network.

Clean Fuel Locomotive Initiative

The government's comprehensive plan centers on replacing diesel-fired locomotives with environmentally friendly alternatives, specifically targeting short to medium-distance railway operations. This focused approach acknowledges the practical applications where battery and alternative fuel technologies can be most effectively implemented in current railway operations.

Retrofit and Replacement Strategy

The initiative encompasses a dual approach involving both complete locomotive replacement and retrofit solutions for existing diesel units. This flexible strategy allows for cost-effective implementation while maximizing the utilization of current railway assets. The retrofit option provides an economically viable pathway for upgrading older locomotives with clean fuel technology.

Technology Implementation Scope

The clean energy transition specifically targets short to medium-distance railway operations, where battery and alternative fuel technologies demonstrate optimal performance characteristics. This strategic focus ensures the most effective deployment of new technologies while maintaining operational efficiency across the railway network.

Infrastructure Modernization Impact

The 2,500 locomotive target represents a substantial portion of India's diesel locomotive fleet, indicating the government's commitment to comprehensive railway sector modernization. This large-scale initiative positions Indian Railways at the forefront of sustainable transportation technology adoption, potentially serving as a model for other developing nations pursuing similar clean energy transitions in their transportation infrastructure.