India’s federal budget for 2026–27 set out a framework to develop City Economic Regions (CERs), with dedicated funding, infrastructure planning and transport connectivity aimed at strengthening urban growth centres, Finance Minister Nirmala Sitharaman said in her budget speech to parliament on Saturday.
Presenting the proposals, Finance Minister Sitharaman said cities are India’s engines of growth, innovation and opportunity, and the government would now focus on Tier II and Tier III cities, including temple towns, that require modern infrastructure and basic amenities. The budget proposes mapping city economic regions based on their specific growth drivers to harness the economic benefits of urban agglomerations.
Under the proposal, the government will provide an allocation of ₹5,000 crore per city economic region over five years to implement development plans. The funding will be provided through a challenge mode, linked to a reform-cum-results-based financing mechanism, according to the budget speech. The Finance Minister said the approach is intended to support cities in planning and executing infrastructure and economic development projects aligned with their local strengths.
The budget also outlined continued support for urban infrastructure as part of the government’s broader capital expenditure programme. Finance Minister Sitharaman said public capital expenditure has increased significantly over the past decade and proposed to raise it to ₹12.2 lakh crore in 2026–27, compared with ₹11.2 lakh crore in the budget estimate for 2025–26. Urban infrastructure, including transport and logistics networks, forms part of the expenditure priorities mentioned in the speech.
To improve inter-city connectivity and support city economic regions, the budget proposed the development of seven high-speed rail corridors between major cities. The corridors identified in the speech are Mumbai–Pune, Pune–Hyderabad, Hyderabad–Bengaluru, Hyderabad–Chennai, Chennai–Bengaluru, Delhi–Varanasi, and Varanasi–Siliguri. Finance Minister Sitharaman described these corridors as growth connectors intended to support passenger movement between urban centres.
The budget also reiterated the government’s focus on developing infrastructure in cities with populations of more than 500,000, particularly Tier II and Tier III cities that have emerged as growth centres. The Finance Minister said the government would continue to leverage financing instruments such as Infrastructure Investment Trusts and Real Estate Investment Trusts to support urban infrastructure development.
In addition, the budget proposed measures to strengthen confidence among private developers during the construction phase of infrastructure projects. Finance Minister Sitharaman announced plans to set up an Infrastructure Risk Guarantee Fund to provide partial credit guarantees to lenders, which may support infrastructure development in urban areas.
The Finance Minister said the city economic regions initiative is part of the government’s broader strategy to accelerate economic growth while ensuring balanced regional development, alongside measures announced for manufacturing, energy security and other sectors in the budget.