New Delhi: Budget support for Indian Railways is set to hit a new high in 2026-27 as the government prepares an ambitious plan to modernize the national transporter with faster, modern trains and better safety systems, two people with knowledge of the matter said. Mint. Capital spending is expected to grow by around 12% next year, or approx ₹2.76 trillion, which would be the highest ever allocation for Indian Railways, the people said.
Indian Railways operates with a two-tier financial structure: its capital expenditure is primarily financed from the Union budget, while operating expenditure is mostly met from its own internal revenue.
The planned increase comes on the heels of unusually fast spending this year, with the railways spending more than 78% of its 2025-26 budget as of mid-November. This is its highest recorded mid-year take-up, underscoring the pace at which major projects have been moving towards implementation.
“Allocation in range ₹2.76 trillion will be a new high, but it is in line with the range of projects already underway, from dedicated freight corridors and high-speed routes to a complete overhaul of rolling stock,” said the first person cited above, on condition of anonymity. “Railways have now asked the Treasury for another increase in FY27, after staying the same for the past two years, this person said.
Budgetary support for railways remained at the same level ₹2.52 trillion in FY25 and FY26 as the Center balanced fiscal consolidation with competing spending pressures. However, the increase in project implementation changed her plans. In 2025-26, Indian Railways is on track to deploy all of its capital expenditure before the end of the year and may seek additional funding in an additional grant application, the second person cited above said.
Much of the expenditure was spent on capacity expansion, new tracks, doubling of tracks, electrification and metropolitan transport, as well as modern locomotives, buses (including Vande Bharat trains) and coaches. Significant financial resources were also absorbed by the Kavach automatic train safety device, reworking of the safety nets and renewal of the tracks.
“Expenditure growth was expected at this stage of execution, but the real gains will only come if capital continues to flow into new assets,” added the second.
Modernization of Indian Railways
The push to accelerate rail modernization began in 2022–23, when the government sharply increased its support to accelerate construction and replace aging assets. The next phase is expected to be even more extensive, with the introduction of 300-400 Vande Bharat trains in various formats, including sleeper versions; procurement of 7,000-8,000 new trains over the coming decade to eliminate waiting lists; a long-term plan for the construction of approximately 50,000 km of new tracks; and doubling the safety budget to meet the railroad’s Mission Zero Accidents goal.
Meanwhile, the higher allocation in 2026-27 could also allow the railways to keep passenger and freight fares unchanged for another year, although freight categories are likely to be reclassified. “Tariff stability is in line with the government’s strategy to support users during a period of heavy infrastructure construction,” said the first person mentioned.
Progress on the dedicated freight corridors, particularly the completion of the Western Dedicated Freight Corridor (DFC) and significant progress on the Eastern Freight Corridor, is expected to be central to the next Budget. As these routes open, freight capacity is expected to improve substantially, helping the railways to increase their main revenue stream.
Railway and finance ministry spokespersons did not respond to Mint’s email queries.
On November 12, Mint reported that the Center is likely to keep infrastructure spending in 2026-27 roughly at the same level as in 2025-26, betting on a recovery in private capital spending. The investment spending target of around 3.1-3.2% of GDP for 2026-27 would mark a shift towards a more calibrated phase of fiscal consolidation, signaling the government’s effort to balance economic momentum and its deficit targets at a time of heightened global uncertainty, the report said.
Meanwhile, experts said capital expenditure on railways for 2026-27 should come from a combination of gross budgetary support (GBS) and market borrowing. Currently, most of its financial support comes from the budget.
“Ideally, capital expenditure by railways should be through a combination of GBS and market borrowing. This would not only help mobilize more funds for capital expenditure but also prevent some of their revenue expenditure from masquerading as capital expenditure to show higher capital expenditure,” said V Shanker, former executive director (planning) at Indian Railways. “Private money flowing in through loans would ensure that the funds are used effectively,” he added.
