Union Budget 2026 | Bengaluru, Varanasi, Surat among 7 city economic regions planned; Rs 5,000 cr to be allocated

New Delhi: Signalling its intent to boost urban civic infrastructure in tier-2 and tier-3 cities, the government has proposed the creation of city economic regions (CERs) with an allocation of Rs 5,000 crore over the next five years.

According to the budgetary document, the allocation has been proposed for seven city economic regions — Bengaluru, Bhubaneshwar-Puri-Cuttack tricities, Coimbatore-Erode-Tiruppur, Pune, Surat, Varanasi and Vishakhapatanam.

For the big municipal corporations, the Finance Minister Nirmala Sitharaman, in her Sunday budget speech, announced an incentive on borrowing for infrastructure development through the issuance of bonds of over Rs 1,000 crore.

"Cities are India’s engine of growth, innovation, and opportunities. This budget aims to further amplify the potential of cities to deliver the economic power of agglomerations,” the Finance Minister said while speaking on initiatives taken by the Modi government on infra development.

The focus in the development of CERs would be to build infrastructure and basic amenities in non-metro cities, including temple towns, through “challenge mode with a reform-cum-result based financing.”

The government expects the move would give impetus to real estate and logistics demands, while expanding the scope and volume of infrastructure growth in the medium term.

Lower borrowing costs

In another policy announcement aimed to give a fillip to urban infra, the finance minister announced Rs 100 crores for the single bond issuance of more than Rs 1,000 crore by a municipal corporation.

The scheme seeks to lower borrowing costs for big-budget civic bodies like Mumbai, Delhi, Bengaluru, Pune and Ahmedabad, which have an annual budget of more than Rs 10,000 crore.

New freight corridor between Dankuni & Surat

The government announced a new dedicated freight corridor between West Bengal's Dankuni and Surat in Gujarat, reports DHNS. The finance minister allocated Rs 2,77,830 crore to the Ministry of Railways for capital expenditure in 2026–27.

The allocation is 10.25% higher. The ministry will get Rs 15,000 crore from Extra Budgetary Resources, the document showed. The railways minister said that maximum funds will be spent on safety and modernisation of infrastructure.