Railway Budget 2026 expectations: 5 ways to drive an important growth engine for the Viksit Bharat vision
By Dhruv Gadh and Nitin KumarThe transport and logistics sector serves as the backbone for India’s Viksit Bharat @2047 vision. As our national carrier, the railways connect remote places, while providing a sustainable and economic mode of travel. Today, India has the fourth largest railway network and is the second biggest freight carrier in the world. The recent budgets have played a key role in supporting this infrastructure by allocating Rs 2 to 2.5 lakh crores for the last two to three years. While investments in infrastructure creation of track and rolling stock have been significant, average train speeds have remained in the range of 20–25 kmph for freight and 50–52 kmph for mail/express passenger over the last ten years. Large public investment has yet to trigger significant private sector involvement in aspects like track, rail station, and manufacturing units. Competition with other modes, especially expressways, requires a clear value proposition to increase freight rail share from below 30% to the ambitious 45% target by 2030.Thus, though budgetary support on infrastructure build remains critical, linking these investments to structural reforms will be essential.It is therefore suggested that the Government focus on the following areas to drive one of its important growth engines—the railways.
- Focus on private investments: Investments by the Government may not be sustainable for long-term sectoral needs and growth. It is therefore important that private investments are channelised to bring innovative technology, efficiency, and service. Based on the learnings from PPP initiatives, the
Indian Railways needs to bring innovative models which are investor-friendly with a proper risk allocation framework for regulatory, financing, construction, traffic, and operational risks. This would lead to wider private sector participation and create a pipeline of projects that add to the railways’ delivery capacity while promoting innovation, newer technology adoption, and efficient O&M practices. As railway projects have high capital costs and socio-economic constraints, cost recovery should include non-tariff measures like non-fare revenue and land value capturing to enhance viability and project returns. - Manufacturing growth: The success in manufacturing rolling stocks like Vande Bharat, passenger coaches such as metros, and automatic train protection systems like Kavach should be encouraged and replicated across the rail industry through private sector led innovations and advanced technologies in rolling stocks, tracks, signalling, and electrical systems. To make India a global rail component manufacturing hub, capacity or production-linked incentives need to be explored for advanced technology components and systems.
- Industry-aligned commercial structure: The present fare and tariff structure needs to be better aligned to the business needs of the freight sector. It is therefore important to align the tariff policy with innovative models which incentivise rail freight, long-term industry commitment, and promote efficiency and competition. These could include introducing a multi-operator regime, dynamic pricing, per train pricing schemes rather than tonnage, time-tabled services, value-added services, return load discount, and multi-modal integration. This would help the railways in bringing non-bulk commodities like containerised movement, auto carriers, and parcels/light-weight shipments, including e-commerce, which are growing at a larger pace than the traditional bulk commodities.
Dedicated Freight Corridors (DFCs): DFCs have demonstrated the opportunity for the Indian Railways to provide efficient and faster freight services. New corridors need to be implemented while ensuring that the services in freight corridors are further optimised through higher capacity and speed capable rolling stocks along with intermodal freight terminals across its network/feeder network. Future corridors may be planned in a targeted time-bound manner involving private and public investments.- Supportive institutional structure: The measures outlined above highlight the importance of the right institutional structure to drive innovative models for achieving customer satisfaction, incentivisation of efficiency, transparency in business, flexibility in operations, disciplined implementation, etc. An enabling regulatory framework is required to bring more transparency and confidence, and marry social obligations with business needs. There is a mismatch between rolling stocks and infrastructure, passenger trains lack track infrastructure, and goods trains lack the type of wagons required to match the operational speed attainable. As a result, assets and investments made are being underutilised. The implementation of safety works such as Kavach 4.0 and advanced signalling systems is slow. The learnings from the implementation of 100% electrification works should be reviewed and repurposed for the implementation of advanced signalling systems.
It is therefore important that the budget drives a transformative agenda for capital recycling models and private sector investments both in capital creation and operations. In addition, it should introduce industry-friendly tariff structures, incentivise rail-linked industries, and provide a robust framework for the introduction of an institutional structure which promotes investments in assets, competition, efficiency, and innovation in services supported by human capital development. By doing so, the budget will enable the Indian Railways to become a strong contributor to the goal of achieving Viksit Bharat @2047.(Dhruv Gadh is Partner and Nitin Kumar is Director – Transport & Logistics, Infrastructure, PwC India)
