Union Budget 2026 Boosts Capex and Deepens Financial Markets

The Union Budget 2026 prioritized sustained economic growth through a significant increase in capital expenditure, pegging Capex at ₹12.2 lakh crore for FY27, up from ₹11.2 lakh crore in FY26. Finance Minister Nirmala Sitharaman emphasized that the spending aligns with the government’s Sabka Sath Sabka Vikas vision, focusing on infrastructure-led development. A key structural reform proposed is the reorganization of public sector non-banking financial companies (NBFCs), including Power Finance Corporation (PFC) and Rural Electrification Corporation (REC), into fewer, larger entities. The consolidation aims to enhance credit delivery, improve operational efficiency, and strengthen technology adoption across public financial institutions. On the capital markets front, the Budget introduced transformative measures to deepen India’s bond market: A ₹100 crore incentive will be offered for any single municipal bond issuance exceeding ₹1,000 crore, encouraging large cities to tap capital markets for urban infrastructure funding. Introduction of total return swaps (TRS) on corporate bonds and a market-making framework supported by access to funds and derivatives linked to corporate bond indices—aimed at boosting liquidity and attracting institutional investors. Review of foreign exchange management rules for non-debt instruments to improve foreign investor participation. These reforms signal a strategic push to diversify financing channels, reduce reliance on bank funding, and build a more robust, deep, and liquid debt market ecosystem—laying the foundation for sustainable long-term investment in India’s growth journey.