Telangana may lean on Central loans for infrastructure push in 2026-27 budget

The Congress government appears to be aggressively pushing towards infrastructure-heavy allocations in the 2026-27 Telangana Budget, raising concerns that the State may be slipping into the fiscal template promoted by the BJP-led Union government, where Central grants are limited and States are nudged towards loans and matching fund commitments.

Chief Minister A Revanth Reddy recently directed officials to prioritise irrigation, transport, urban development, energy and mega projects such as Future City, the Regional Ring Road, Musi riverfront development, Hyderabad Metro expansion, radial roads and expressways, with the aim of maximising funds from Central schemes and interest-free infrastructure loans. Sources said the proposals were largely framed around how much could be leveraged from the Centre’s infrastructure push, even if it required additional borrowing.

The Union Budget has provided 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 under this window, apart from nearly Rs 5,000 crore through centrally sponsored urban missions and highway funds. To qualify, the State plans to show matching allocations in advance, effectively shaping its own spending priorities around Central conditions. Funds are also expected to be sought under AMRUT, Smart Cities, PM Gati Shakti and similar programmes.

However, Central assistance comes with riders. Accordingly, the States are mandated to provide matching grants, bear land acquisition costs and mobilise the balance through borrowings. Introduced after the COVID-19 pandemic, this policy has gradually shifted the burden of capital expenditure onto States, forcing them to depend more on loans than unconditional grants. The key question being raised in political and administrative circles is whether the Congress government is walking into a fiscal trap that the previous BRS regime had consciously avoided.