Little emphasis on project preparation, resorting to asset monetisation sans guardrails, narrow financing base are pain points.

The Union Budget has reaffirmed India’s reliance on public capital expenditure as the central pillar of its growth strategy. Public investment has expanded rapidly over the past five years. Central government capital expenditure has risen sharply in both absolute terms and as a share of GDP, marking a clear break from the fiscally constrained post-2012period. This sustained push has helped crowd in private investment.

However, execution capacity has not scaled up at the same pace. Project monitoring data continue to show a sizeable pipeline of stalled or delayed infrastructure projects, with time overruns and cost escalations remaining widespread. Land acquisition challenges, regulatory clearances, weak project preparation and financing stress are repeatedly cited as binding constraints, particularly in highways and urban infra-structure. The divergence between rising allocations and uneven out-comes suggests that India’s infrastructure challenge is now less about spending levels and more about delivery systems.

Three structural gaps in infrastructure finance merit closer attention. First, India does not lack project announcements; it lacks bankable projects. Too often, projects are launched before land is secured, demand risks are rigorously assessed, or revenue and risk-sharing frame works are clearly defined. The result is predictable: delays, cost overruns and growing risk aversion among long-term investors.

A professionally managed and adequately funded project preparation framework — covering feasibility studies, environmental and social safeguards, and financial structuring — can materially improve execution quality. International experience shows that relatively small up-front investments in preparation significantly reduce downstream fiscal and contractual stress. Without this foundation, higher capital out-lays risk translating into stranded assets.

Non-debt instrument

Second, asset monetisation has emerged as an important non-debt financing instrument, particularly in the transport sector. Recycling capital from mature, revenue-generating assets into new infrastructure can ease fiscal pressures while sustaining investment momentum.

But credibility is key. Transparent valuation, competitive bidding, service-quality safeguards and clear ring-fencing of proceeds for fresh capital formation are essential to ensure monetisation strengthens, rather than undermines, public balance sheets. Absent these guardrails, monetisation risks being perceived as a short-term fiscal expedient rather than a durable financing strategy.

Third, despite the scale of infrastructure spending, India’s financing base remains relatively narrow. Banks and budgetary resources still dominate, while long-term domestic investors — pension funds, insurance companies and provident funds — play a limited role.

Expanding the use of long-dated, inflation-linked infrastructure bonds, strengthening pooled municipal finance mechanisms and providing regulatory clarity for institutional investment in infrastructure funds would better align financing tenors with asset lifecycles.

Recent RBI data indicate that States have increased capital expenditure as a share of GDP in recent years, reflecting a welcome shift towards growth-enhancing spending. However, aggregate improvement conceals wide inter-State variation in fiscal space, project readiness and execution capacity. Many States continue to face weak project pipelines, limited own-source revenues and rising committed expenditures. In this context, Central support — through long-tenor, concessional loans for State capital expenditure — would yield stronger results if increasingly linked to measurable improvements in project preparation, financial re-porting and user-charge frameworks.

One of the most under-emphasised aspects of India’s infrastructure strategy is operations and maintenance. Inadequate lifecycle funding leads to rapid asset deterioration, eroding economic returns and raising costs.

Climate risks compound this challenge. Floods, heat stress and extreme weather events are shortening asset lives and increasing maintenance burdens. Integrating maintenance planning, climate-resilient design standards and risk-sharing mechanisms into infrastructure finance frameworks would significantly improve value for money and protect public investment.

The challenge now is institutional: ensuring that projects are prepared better, financed smarter and maintained properly across both the Centre and the States.

The writer is Senior Fellow at NCAER, New Delhi. Views expressed are personal.