Union Budget 2026: A Catalyst for Industrial Surge Amidst Infrastructure Lull

The 2026 Union Budget is anticipated to boost the industrial sector, especially for infrastructure and capital goods, amid slow road awards. Increased allocation may revive projects, while companies diversify into non-road sectors for growth. A recovery in private capex in renewables and semiconductors is expected.

As the Union Budget 2026 approaches, industry experts are eyeing it as a pivotal opportunity to rejuvenate the industrial sector. Higher government allocations are expected to spur domestic orders, particularly benefiting infrastructure and capital goods companies, according to a report by HDFC Securities Institutional Research.

The report underscores a sluggish trend in road awards by the National Highways Authority of India (NHAI), with only 1,951 km awarded in the first nine months of FY26, a sharp drop from 7,538 km in the previous year. The slowdown has fueled expectations of Budget intervention to revive project awards.

Despite the downturn, the bidding pipeline remains robust, with NHAI working to strengthen bidding norms and discourage non-serious participants. Additionally, liquidity pressures for Engineering, Procurement, and Construction (EPC) players may ease with working capital releases expected to surge from Q4FY26.

The report also highlights a pickup in awarding activity in sectors like private real estate and urban infrastructure. EPC firms are diversifying into solar, battery energy storage, railways, and river interlinking, anticipating a potential surge in NHAI orders toward FY26's end, estimated to total Rs 500 billion.

Private capital expenditure is projected to focus on renewables and semiconductors. The capital goods sector awaits a broader private capex recovery, though transmission and distribution continue to exhibit strength. High-voltage direct current projects are poised for ample orders with a Rs 0.8 trillion pipeline over two years, bolstering the demand for battery storage systems.

While EPC valuations remain at cyclical lows, the report suggests that a Budget-induced revival could spark earnings recovery and revaluation of the industrial sector.

(With inputs from agencies.)