The new infrastructure imperative: Budget priorities for a high-growth, low-inflation India

Budget 2026: India has made bold strides in infrastructure development over the past few years across the energy, transport and logistics, urban infrastructure, social infrastructure and digital public infrastructure sectors. Also, the country has a stated goal of becoming Viksit Bharat by 2047, which is underpinned by development of a strong manufacturing sector in India, a robust services economy, a developed agricultural products and agricultural products processing sector and increased domestic consumption, along with an efficient logistics network, development of more planned cities and resilient digital infrastructure.

One of the historic concerns affecting competitiveness of Indian products has been its high logistics cost (13 to 14 percent of GDP) and the time taken to move input materials and products from the production centres to demand centres, ports or airports. In 2021, the need for more efficient logistics with appropriate visibility across the value chain of projects and the multimodal logistics network, as well as the aim to reduce logistics costs to globally competitive levels were realised with the PM Gati Shakti programme. This programme integrated 7 key growth engines across different transport categories, 50 ministries and all 36 states and union territories.

Considerable progress has been achieved under the Gati Shakti programme due to infrastructure and capacity augmentation in the highways, port cargo, waterways, airports and urban infrastructure spaces in a planned manner. Unified platform for planning new projects and the availability of information across projects have helped India reduce overall logistics costs to below 10 percent of GDP. This has taken India closer to the global average of 6 to 8 percent and helped improve its rank on the World Bank Logistics Performance Index to 38 in 2023.


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Going forward, the Government should ideally continue to build on its efforts in this programme, using the benefits of the infrastructure and information systems created so far. The Government should also continue its momentum on building highways, including some reviving projects on the BoT mode, augmenting ports-based logistics capacities and also considering more private participation in the railways space to help increase the pace of expansion in this sector, while reducing the capital needed to be spent by the Government.

Further, given the focus on manufacturing in India, the Government could consider more port or airport-based industry-specific manufacturing and logistics zones, which are pre-developed and well connected to the existing and upcoming transport infrastructure. This will thus reduce the time taken by user industries to set up their operations. The Government should also consider implementing PPP models for new airports, railway infrastructure (including stations) and urban infrastructure (including components to build metro lines in big cities).

Economic development will also lead to the expansion of existing cities and creation of newer cities as urbansiation increases. A key imperative would be to make cities smart, green and more livable across various parameters including usability of public transport (e.g. appropriate last mile connectivity) and traffic management, air and water quality, access to open and green spaces, affordable and quality housing and working spaces and access to recreational spaces.

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This would need strategic interventions to study the current challenges and development plans for key cities and try to specifically fund and create infrastructure that will help manage some of these challenges. The Government should, in consultation with stakeholders, build models for more private players’ participation in sectors such as water and sanitation, bus terminals and train stations, coastal transport, parts of metro rail, last mile connectivity networks and recreational spaces. India has also built out significant digital public infrastructure (DPI) which include the Aadhar system, Jan Dhan accounts, UPI for payments, Digilocker for secure storage of issued documents, etc. It has also been working on various interventions in the areas of education, healthcare and e-commerce. This has helped in improving governance, reducing leakages and helping in financial inclusion and economic growth.

Each of these initiatives including the Gati Shakti programme, smart cities and the existing and upcoming DPI generates a significant amount of data. While India consumes about 20 percent of global data, it has under 5 percent of global data centre capacity.

The Government should work with states and consider specific DPI initiatives to create additional infrastructure across data centres, fibre connections, towers and networks, including the associated value chains. This will assist in more Indian data being stored in domestically, which can be used to train India-specific AI models which will bring economic and efficiency benefits across sectors and further improve the digital public infrastructure delivery.

In summary, given the strong economic growth recently exhibited by India, the projected benefit that infrastructure spend has on GDP growth and the focused approach of the government to make India globally significant and competitive across sectors, a strong infrastructure spending increase (at a multiple of GDP growth) would yield significant benefits and help India achieve its goal of becoming Viksit Bharat by 2047.

The autor is Partner, Deloitte India