Telangana Budget 2026-27: Why State is betting big on infrastructure projects and what the impact could be

The Telangana government may focus on infrastructure-heavy allocations in the 2026-27 Budget to tap Central schemes and loans. Critics warn that reliance on borrowed funds could increase financial pressure if expected Central funding does not materialise

Hyderabad: The Congress government appears to be moving towards infrastructure-heavy allocations in the 2026-27 Telangana Budget, raising concerns that the State could be aligning with the fiscal framework promoted by the BJP-led Union government, where Central grants are limited and States are encouraged to rely on loans and matching fund commitments.

What is the infrastructure push planned in the Telangana Budget?

---

Chief Minister A Revanth Reddy recently directed officials to prioritise irrigation, transport, urban development, energy and large infrastructure projects. These include Future City, the Regional Ring Road, Musi riverfront development, Hyderabad Metro expansion, radial roads and expressways. The objective is to maximise funds from Central schemes and interest-free infrastructure loans. Sources said several proposals were structured around how much funding could be leveraged from the Centre’s infrastructure push, even if it requires additional borrowing by the State.

How much Central funding is Telangana targeting?

The Union Budget has allocated Rs 12.2 lakh crore for capital expenditure and Rs 1.5 lakh crore in interest-free 50-year loans for States. Telangana is learnt to be targeting about Rs 15,000 crore from this loan window. Apart from this, the State is also looking to access nearly Rs 5,000 crore through centrally sponsored urban missions and highway-related programmes. To qualify for these funds, the State plans to show matching allocations in advance, effectively shaping its own spending priorities around Central funding conditions. Funds are also expected to be sought under AMRUT, Smart Cities, PM Gati Shakti and similar programmes.

What are the conditions attached to Central assistance?

Central assistance comes with several conditions. States are required to provide matching grants, bear land acquisition costs and mobilise the remaining funds through borrowings. Introduced after the COVID-19 pandemic, this policy gradually shifted the burden of capital expenditure onto States, forcing them to depend more on loans rather than unconditional grants. This has raised a key question in political and administrative circles: whether the Congress government is moving into a fiscal framework that the previous BRS regime had consciously avoided.

How did the previous BRS government approach such funding?

During its tenure, the BRS government largely resisted loan-driven spending that offered short-term relief but added long-term liabilities. Instead, it focused on improving tax revenues to fund welfare programmes and irrigation projects. A notable example was its refusal to install digital meters for agricultural power connections despite pressure from the Centre to avail additional loans amounting to 0.5 per cent of its GSDP. Accepting the condition would have enabled additional borrowing linked to power-sector reforms but imposed long-term financial obligations on the State.

Why are critics raising fiscal concerns now?

In contrast, the current budget exercise appears aligned with the Centre’s framework, where assistance is tied to reforms, matching shares and borrowing commitments. Officials admitted that several pending projects, land acquisition works and major urban infrastructure plans can move forward only if the State secures Central loans and increases its borrowings. Critics and financial experts argue that the Congress government is prioritising high-visibility infrastructure over fiscal stability at a time when Central grants are shrinking and States are increasingly being pushed to finance development through debt. They warned that heavy dependence on borrowed funds could delay projects and increase financial liabilities if the expected Central funds do not materialise.

What lies ahead for Telangana’s finances?

With budget preparations entering the final stage, the Congress government appears to be betting on infrastructure-led growth backed by Central funds, loans and deferred liabilities. Experts caution that without a balanced fiscal strategy that also strengthens revenue generation, the State’s finances could face pressure in the coming years. They suggest adopting a balanced fiscal plan that addresses welfare commitments while keeping revenue realities in focus.