By: Vlad Benn, Senior Policy & Research Manager
Policy and Regulation
India’s infrastructure policy framework operates on the basis of cooperative federalism, an evolving relationship between the Union and State governments that is pivotal to how infrastructure is planned, financed and executed. The Union government sets the standards, develops the national pipelines and oversees Public Sector Undertakings including the NHAI, Power Grid Corporation and the Airport Authority of India. States on the other hand, execute the delivery at the local level, handling land acquisition, environmental clearances, power distribution and local road build out.
Flagship Infrastructure Frameworks
| Initiative | What It Is | How It Functions in Practice | Implications for Investment & Investability |
|---|---|---|---|
| National Infrastructure Pipeline (NIP) | INR 111 lakh crore (~US$1.35 trillion) multi-sector investment pipeline covering roads (~18%), energy, rail, urban, social and digital infrastructure. | Provides a consolidated, forward-looking project pipeline across central and state agencies; signals sectoral allocation priorities and sequencing. | Enhances visibility and planning certainty; supports long-term capital allocation; reduces pipeline fragmentation and improves coordination across ministries and states. |
| PM Gati Shakti – National Master Plan | Integrated, multi-modal connectivity platform linking roads, rail, ports, airports, logistics parks and industrial corridors via digital mapping. | Uses geospatial platforms to align infrastructure planning across agencies; aims to reduce duplication, accelerate clearances and optimise logistics networks. | Improves project selection and execution efficiency; reduces land and right-of-way risk; enhances bankability by lowering coordination delays and construction uncertainty. |
| National Monetisation Pipeline (NMP) | Asset recycling programme monetising brownfield assets — roads, transmission lines, pipelines, warehouses, airports — through concessions, InvITs and structured transactions. | Transfers operational assets to private operators under long-term contracts; frees up public capital for reinvestment in greenfield projects. | Deepens secondary market liquidity; improves cash-flow visibility via mature assets; attracts long-term institutional capital including InvIT structures. |
| Bharatmala (Highways Programme) | National highways expansion and corridor development programme. | Focused on economic corridors, border roads and connectivity gaps; largely delivered through HAM, BOT and EPC structures. | Expands the investable road asset base; supports availability-based concession models; improves logistics efficiency and traffic visibility for toll corridors. |
The government also operates targeted sectoral programmes such as: Sagarmala and Maritime India Vision 2030 (ports), Dedicated Freight Corridors (rail), UDAN (regional airports), Smart Cities and AMRUT 2.0 (urban), and Digital India / BharatNet (Fibre). These extend the investable universe beyond roads and power verticals.
Why India’s Policy Framework Leads the Region
The central government’s track record of building and integrating investable policy frameworks, rather than simply announcing intent, is a key factor in why the country sits at the top of the regional hierarchy for private infrastructure capital.
Pipeline Clarity is Unmatched by Peers
India has the most institutionalised medium-term infrastructure pipeline in the region. The NIP gives investors a consolidated, multi-sector view of project sequencing across both central and state agencies, this pipeline is regularly tracked and updated for budgetary allocation. This approach differs greatly fromIndia’s regional peers: Vietnam, for instance, has a public investment plan and the Philippines has a 185-project pipeline which is comparable in ambition to India, but they lack is the of institutional architecture that India has created to deliver and maintain these systems. Indonesia too has a planning function through the Bappenas that is well developed, but lacks the transparency needed to deploy capital at the project level which serves as a barrier for private investors.
This institutionalisation of government planning and delivery has paid dividends for India. Greenfield transactions in India have attracted 1.7x more private capital than Indonesia and ~3.5x more than the Philippines and Vietnam. While this can be attributed to market size and function, it also reflects investor confidence in pipeline predictability, contractual frameworks and regulatory architecture that has been stress tested through multiple delivery cycles. The IEA updated commentary on the Cost of Capital Observatory highlights political risk as the primary driver of the cost of capital in Southeast Asian countries, noting that India does not suffer from that problem. This has a direct implication for funds deploying capital in India: they can build sector and sub-sector exposure with greater forward pipeline visibility – something not available elsewhere in the region at this scale. As a result, sequencing risk is materially lower when the pipeline has institutional backing.
The institutional quality is also improving at the distribution (discom) layer, historically the weakest link in the energy investment chain. In 2026, Indian discoms posted their first collective profit in FY2024-25 with outstanding dues to generators falling 96% since 2022. The discom problem however has not yet been fully resolved, accumulated losses remain significant (US$75-77 billion stock) and state level dispersion is wide, the direction of travel, however, is clear and strengthens the investment case for sectors where offtaker quality has historically required a risk premium.
De-risking Mechanisms Now in Practice
India has a multitude of tools that have been operationalised to de risk the delivery of complex infrastructure projects. The Gati Shakti for example is a fully functioning geospatial platform, not just a planning document. IIFCL, NIIF and NaBFID are active lenders with strong track record of performance. Furthermore, the HAM concession structure has been deployed across hundreds of road projects and viability gap funding (VGF) is consistently paid out across renewable and urban infrastructure.
Sub-national Execution: The Gap Between Policy and Delivery
The structural advantages India has at the central level are offset by inconsistencies in sub-national execution capacity. Land acquisition timelines, discom reform progress and state-level PPP governance structures vary significantly across states. The difference between Gujarat or Maharashtra and a less developed state is not purely cosmetic. Investors need to treat state selection as a risk variable alongside sector and counterparty quality.
This is not unique to India, Indonesia faces analogous regional variation and the Philippines has documented bottlenecks at both national and local government levels. However, the scale of India’s geography means the dispersion is wider. A policy framework rated highly at the central level can underdeliver if state level implementation capacity is not increased.
Issues to Watch in 2026
Energy Security and the Iran Conflict
The US-Iran conflict and the closure of the Strait of Hormuz in March 2026 has created a significant near-term energy challenge and security test for India. At peak risk, approximately 2.5-2.7 million barrels of India’s crude oil daily imports are sourced from Iraq, Saudi Arabia, Kuwait and UAE, all of which transit through the Strait. India’s strategic petroleum reserves cover around 25 days of crude oil, providing a short-term buffer, but this is not a structural solution.
India’s response much like its policy to date, has been characterised by pragmatic diversification rather than any political alignment. When the US Treasury issued sanction waivers allowing India refiners: IOC, BPCL, HPCL and Reliance, to purchase already produced Russia and sanctioned Iranian crude from vessels at sea, Indian refiners moved quickly to take advantage. Reliance purchased 5 million barrels of Iranian crude at market terms within days of the waiver. Simultaneously, India seized three sanctioned Iranian oil tankers off Mumbai in February, signalling opportunistic alignment with international enforcement. This reflects a calculated balancing act that preserves India’s relationship with Washington while protecting domestic energy supply.
The fiscal consequence of sustained high oil prices is a concern for India’s infrastructure and economic progress. A cited rule of thumb from discussion with our investor’s members (consistent with IMF and RBI sensitivity analysis) shows that for every US$10/barrel increase above US$100 costs India around one quarter of economic progress, as the additional import bill erodes the fiscal headroom that would otherwise be deployed into investment and infrastructure. With Brent having moved from c.US$80 to over US$120/barrel since the start of the Iran war, India is already absorbing a shock of that magnitude. As we have seen, prices have been inconsistent and should they remain elevated, the NIP budget allocation and viability gap funding mechanism that underpin private infrastructure bankability could face pressure.
There are also inflationary risks. The Economic Times sites a similar example, for every US$10 rise in crude, India sees a 60-basis point increase to headline inflation. at the current variable price levels this could represent a meaningful constraint to the RBI’s room to cut rates, higher inflation will delay monetary easing, keeping the cost of domestic debt elevated. This can directly affect the financing economics for infrastructure projects that rely on long tenor rupee debt. For availability-based concessions and InvIT structures where distributions are partly funded by debt service, rate dynamics are important.
We see two implications that the energy security dynamics have for investors. First, it reinforces a structural investment case for India’s domestic renewable energy development, every MW of domestic solar or wind reduces the country’s vulnerability to future energy shocks and distruptions, compressing the fiscal drag of oil price rises and strengthening the policy rationale for continued renewable energy support. Second, the Chabahar port investment, India’s connectivity corridor with Central Asia and Afghanistan is now under direct pressure, with the 2026-2027 Union Budget dropping its funding allocation. If Chabahar transitions to Chinese or Russian operators, India loses its principal overland route to Central Asia independently of the maritime corridor, representing a significant geopolitical and infrastructure setback.
Conclusion
India’s policy framework is one of the most coherent among emerging markets. A decade of institutional investment and pipeline architecture, concessions, standardisation, and de-risking mechanisms has produced a demonstrably better capital deployment outcome compared to regional peers, one that is increasingly evident, highlighted by the energy distribution layer turning profitable for the first time. The 2026 energy security shock has tested institutional quality under stress, and the fiscal and inflationary consequences of sustained high oil prices could have significant ramifications for India’s infrastructure and growth ambitions.