He also announced a corpus of Rs 17,000 crore for the local rail network in Bengaluru, the capital of Karnataka which goes to polls later this year.
"The Mumbai transport system, which is the lifeline of the country, will be expanded and augmented to add 90 km of double line track at the cost of Rs 11,000 crore.
"An additional 150 km of suburban network is also being planned at a cost of Rs 40,000 crore, including elevated corridors at some sections," Mr Jaitley said.
Maharashtra Chief Minister Devendra Fadnavis tweeted "Celebrate Mumbai!" moments after the announcement was made.
The suburban railway in Mumbai operates 2,342 local train services and carries more than 7.5 million commuters daily and this is the first time that the network is being expanded.
The project is a joint venture between the state government and the Indian Railways, and the state government would bear 20 per cent of Rs 349 crore of the total cost.
"A suburban network of approximately 160 km at an estimated cost of Rs 17,000 crore is being planned to cater to the growth of the Bengaluru metropolitan," Mr Jaitley said.
Railway officials said that in the Bengaluru network, as of now, there will be a total of 58 trains offering 116 services. Each train will have a capacity to carry 1,800 to 2,000 passengers per trip.