NEW DELHI: The Union Cabinet has approved infrastructure schemes and projects with cumulative expenditure ₹1.6 trillion, including the Urban Challenge Fund for urban development and ₹10,000 crore Startup India Fund of Funds 2.0, Union Information and Broadcasting Minister Ashwini Vaishnaw said on Saturday.
The decision was taken at Friday’s cabinet meeting.
Urban Challenge Fund
With central help ₹1 trillion Urban Challenge Fund will use market-based financing and private participation in urban development projects and will attract investments worth ₹4 trillion over the next five years.
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The fund will operate from fiscal year 26 to fiscal year 31, with project implementation able to continue through fiscal year 34.
Vaishnaw said the central assistance will cover 25% of the project cost, subject to raising a minimum of 50% from the market through municipal bonds, bank loans and public-private partnerships (PPPs). States, Union Territories (UTs) and Urban Local Bodies (ULBs) will contribute the remaining share.
“The fund aims to build resilient, productive, inclusive and climate-responsive cities and position them as key drivers of the country’s next phase of economic growth,” the Ministry of Housing and Urban Affairs said in a statement.
Projects will be selected through a transparent and competitive call mode. The Government will emphasize reforms across urban governance, market and financial systems, operational efficiency and urban planning to ensure that urban centers have access to capital.
The cabinet also approved a ₹5,000 crore credit guarantee scheme aimed at enhancing the creditworthiness of cities and municipalities, primarily in hill states, north-eastern states and smaller urban local bodies with a population of less than 1 lakh.
“The scheme will provide a central guarantee up to ₹7 million or 70 percent of the loan amount (whichever is lower) for first loans. Upon successful repayment of the first loan, central guarantee from ₹7 million or 50 percent of the loan amount (whichever is lower) will be provided. This will effectively support minimum projects ₹20 crore for the first time and Rs 28 crore for subsequent projects in smaller towns,” he said.
Urban rejuvenation was also a focus of the Union Budget for FY27.
Presenting the budget on February 1, 2026, Finance Minister Nirmala Sitharaman said, “Cities are India’s engines of growth, innovation and opportunity. We will now focus on tier-II and tier-III cities and even temple cities that need modern infrastructure and basic amenities. This budget aims to further strengthen the potential of cities to deliver economic growth to regions based on their economic growth (CER).”
She proposed an assignment ₹5,000 crore to the city’s economic region over five years.
Startup India Fund of Funds 2.0
The Cabinet also approved the Startup India Fund of Funds 2.0 (Startup India FoF 2.0) with corpus ₹10,000 crore to mobilize venture capital for the country’s startup ecosystem.
The scheme aims to accelerate the next phase of India’s startup journey by mobilizing long-term domestic capital, strengthening the venture capital ecosystem and supporting innovation-driven entrepreneurship.
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The first such fund, the Fund of Funds for Startups (FFS 1.0), was launched in 2016 to address funding gaps and accelerate the domestic venture capital market. Under the first fund, the entire corpus ₹10,000 crore has been allocated to 145 Alternative Investment Funds (AIFs) that have invested more than ₹25,500 crore in over 1,370 startups across sectors including agriculture, artificial intelligence, robotics, automotive, cleantech, consumer goods and services, e-commerce, education, fintech, food and beverage, healthcare, manufacturing, space and biotech.
“While the first phase was building an ecosystem, Startup India FoF 2.0 is designed to take Indian innovation to the next level. The new fund will have a targeted, segmented approach to funding,” another official statement said.
The fund will support deep-tech startups and technology-driven innovative manufacturing segments that require long-term capital.
Approval of infrastructure
Among other things, the Union Cabinet has approved the construction of a four-lane greenfield controlled access connectivity project from Gohpur on NH-15 to Numaligarh on NH-715 in Assam, including a 15.79-km road and rail tunnel under the Brahmaputra River, at a total cost ₹18,662 crores.
The Cabinet also approved three multi-track railway projects covering 12 districts across Delhi, Haryana, Maharashtra and Karnataka, expanding the Indian Railways network by around 389 km at an estimated cost ₹18,509 million crowns.
Government offices change
Vaishnaw said this was the last Union Cabinet meeting held in the South Block as the Prime Minister’s office shifted to Seva Teerth, a newly constructed building in the Central Vista area. With the shifting of offices to Kartavya Bhawans and Seva Teerth, the north and south blocks will be converted into a museum, he said.
Seva Teerth houses the Prime Minister’s Office, the National Security Council Secretariat and the Cabinet Secretariat, which were previously housed in different premises.
“The Cabinet today also decided that the North and South Blocks will be part of the ‘Yuge Yugeen Bharat National Museum’, which will continue to inspire generations of our thousand-year-old civilization. This museum will celebrate our timeless and eternal cultural heritage and connect our glorious past with a prosperous future,” the minister quoted from the Cabinet resolution.