Union Budget 2026–27: A blueprint for infrastructure, manufacturing, and inclusive development.

Introduction:

The Union Budget 2026–27 was presented by Finance Minister Nirmala Sitharaman on 1st February 2026 in the Parliament. Positioned at a critical juncture, midway through the Vision 2047 journey this budget attempts to balance growth imperatives with fiscal discipline, while addressing structural constraints confronting the Indian economy.

- - At its core, the Budget lays out an infrastructure‑led, reform‑oriented, and manufacturing‑driven strategy to sustain high growth trajectories, improve ease of living for citizens, catalyse private investment, and deepen India’s role in global supply chains. Its contours reflect continuity with past priorities but also some bold new policy initiatives, especially in technology, data infrastructure, and tax reforms.
  - The Budget Estimates (BE) for 2026-27 project non-debt receipts at ₹36.5 lakh crore and total expenditure at ₹53.5 lakh crore, with net tax receipts of ₹28.7 lakh crore. Gross market borrowings are estimated at ₹17.2 lakh crore, with net borrowings from dated securities at ₹11.7 lakh crore. Fiscal deficit is projected at 4.3% of GDP, while the debt-to-GDP ratio is estimated at 55.6%, slightly down from 56.1% in the Revised Estimates (RE) 2025-26.

About the Budget

In the Indian Constitution, the term “Budget” is not explicitly used; it is referred to as the Annual Financial Statement under Article 112. It is presented to both Houses of Parliament by the Finance Minister on the recommendation of the President and contains details of estimated receipts and expenditure for the financial year (1 April–31 March).

Key Provisions:

- Article 110 (Money Bill): Defines what constitutes a Money Bill, including taxation, government borrowings, and custody of the Consolidated Fund. The Finance Bill, part of the Budget, is usually a Money Bill.
- Article 113 (Procedure for Estimates): Differentiates charged (non-votable) and voted expenditures.
- Article 114 (Appropriation Bills): No money can be withdrawn from the Consolidated Fund without an Appropriation Act.
- Article 115 (Supplementary Grants): Allows Parliament to approve additional expenditure for unforeseen needs or new services.
- Article 116 (Vote on Account): Permits advance grants to keep the government running before full Budget approval.
- Articles 117 & 265: Deal with Financial Bills and establish that taxes can only be levied by law.
- Articles 266–267: Establish the Consolidated Fund, Public Account, and Contingency Fund for regular and unforeseen government expenditures.

These articles provide the legal and procedural foundation for India’s budgetary process, ensuring accountability, parliamentary control, and fiscal discipline.

The Budget is inspired by three Kartavyas, reflecting the government’s approach to balanced development:

1. Accelerating and Sustaining Economic Growth
The first Kartavya focuses on enhancing productivity and competitiveness across the economy, while strengthening its ability to withstand global uncertainties. This means policies that push manufacturing, infrastructure, innovation, and export competitiveness — with an effort to make growth resilient and long-term.

2. Fulfilling Aspirations and Building Capacities
The second Kartavya is centred on people-centric development: creating opportunities, supporting skill building, promoting employment, and empowering citizens to be active participants in India’s growth journey. It emphasises enabling individuals — especially youth, women, and disadvantaged groups — to realise their economic and social aspirations.

3. Ensuring Inclusive Growth (Sabka Sath, Sabka Vikas)
The third Kartavya aligns with the government’s motto of Sabka Sath, Sabka Vikas — ensuring that every family, community, region, and sector has access to resources, amenities, and opportunities. This reflects an inclusive approach to development, where benefits of growth are widely shared across India’s diverse population.

Key aspects of budget:

1. Macroeconomic Landscape and Fiscal Strategy:

India’s macroeconomic backdrop on the eve of the Budget reflects resilience. Real GDP growth was estimated at 7.4% in FY 2025–26, with nominal growth projected at 10% in FY 2026–27. The government reaffirmed its commitment to fiscal consolidation, targeting a fiscal deficit of 4.3% of GDP for FY27, a marginal reduction from the previous year with a medium‑term aim of stabilising debt ratios around 50% of GDP by 2030.

Capital Expenditure Push

A cornerstone of the budget remains public capital expenditure, a driver of infrastructure creation and economic multiplier effects. The capex outlay was increased to ₹12.2 lakh crore, equivalent to 4.4% of GDP, demonstrating the government’s intent to sustain asset creation and crowd in private investment.

Capex priorities span transport networks, logistics, waterways, urban infrastructure, and energy systems designed to improve connectivity, reduce logistics costs and facilitate industry competitiveness.

Tax Reforms and Ease of Compliance:

One of the most anticipated features of Budget 2026 was the overhaul of the tax system to make it simpler, more transparent, and conducive to compliance.

New Income Tax Act and Simplification

A landmark reform announced is the Income Tax Act, 2025, which will come into effect from April 1, 2026. This replaces the six‑decade‑old legislation with a more streamlined code aimed at reducing litigation and easing filing processes. New IT return forms are expected to be more user‑friendly, with simplified provisions benefitting individuals and businesses.

Tax Relief and TCS Rationalisation

The Budget introduced several tax‑relief measures, including:

· Retention of existing income tax slabs, with relief on compliance rather than rate changes.

· Reduction in Tax Collected at Source (TCS) on overseas tour packages, education, and medical remittances under the Liberalised Remittance Scheme to 2%, facilitating smoother global mobility.

These moves reflect a delicate balance: maintaining revenue buoyancy while easing compliance burdens, a key aspiration for taxpayers and businesses alike.

2. Infrastructure, Connectivity and Logistics:

High‑Speed Rail Corridors

A headline proposal was the launch of seven new high‑speed rail corridors, connecting major economic clusters such as Mumbai–Pune, Pune–Hyderabad, Hyderabad–Bengaluru, Delhi–Varanasi, and Varanasi–Siliguri. These corridors aim to dramatically compress travel times, improve mobility, and act as growth collectors around urban agglomerations.

Such investments are expected to boost industrial linkages, regional development, and job creation in construction, operations, and allied services.

National Waterways and Dedicated Freight Corridors

The Budget emphasised logistics efficiency through:

· Operationalisation of 20 national waterways over five years.

· New Dedicated Freight Corridors linking the east and west (e.g., Dankuni to Surat), reducing freight costs and facilitating seamless goods movement.

Collectively, these initiatives aim to reduce logistics costs, currently among the highest in developing economies, and enhance global competitiveness.

Infrastructure Risk Guarantee Fund

To encourage private participation in long‑gestation projects, an Infrastructure Risk Guarantee Fund was proposed to provide partial credit guarantees, reducing risk perception among lenders and investors.

Manufacturing and Strategic Industries:

The Budget doubled down on the principle that manufacturing is central to sustainable growth, particularly in strategic and high‑technology sectors.

India Semiconductor Mission 2.0

Recognising the global chip shortage and supply chain fragilities, the government announced India Semiconductor Mission 2.0, building on earlier efforts to attract investment in electronics and semiconductor fabrication.

Sectoral Focus Beyond Semiconductors

Other major manufacturing initiatives include:

· Biopharma SHAKTI programme (₹10,000 crore) to develop the biopharmaceutical ecosystem.

· Electronics Components Manufacturing Scheme with an enhanced outlay of ₹40,000 crore.

· Rare Earth Corridors in states like Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to support mineral processing and advanced manufacturing.

These strategic pushes are designed to reduce import dependence, create high‑value jobs, and integrate India more deeply into global production networks.

MSMEs, Entrepreneurship and Access to Capital:

Small businesses form the backbone of India’s economy, providing employment, fostering entrepreneurship, and sustaining rural and urban livelihoods.

Small and Medium Enterprises (SME) Growth Fund

To stimulate MSME growth, a ₹10,000 crore SME Growth Fund was announced, complemented by a ₹2,000 crore top‑up to the Self‑Reliant India Fund.

Liquidity Support and Credit Reforms

· Mandatory use of TReDS (Trade Receivables Discounting System) for Central Public Sector Enterprises (CPSE) purchases from MSMEs to improve liquidity.

· Credit guarantee enhancements aimed at reducing financing costs and enabling risk sharing.

· Corporate Mitras in Tier II and Tier III towns to help firms navigate compliance obligations efficiently.

These structural interventions seek to enhance access to capital, formalise financing channels, and integrate small firms into larger value chains.

3. Social Sectors: Education, Health and Rural Welfare:

The Budget reaffirmed the government’s commitment to social sector investments while embedding technology into development interventions.

Education and Skill Development

· Establishment of girls’ hostels in every district under a viability‑gap funding model to improve participation in higher education.

· Support for the Animation, Visual Effects, Gaming, and Comics (AVGC) sector to build creative talent pipelines and link education to employment.

These steps reflect recognition that human capital development is essential for long‑term economic competitiveness.

Agriculture and Farmer Support

Agricultural policy shifted further towards productivity enhancement over subsidies, including technology‑driven interventions such as Bharat‑VISTAAR, a decision‑support platform integrating data resources to help farmers optimise outcomes.

4. Defence, Security and Strategic Autonomy:

In line with national security imperatives, the Budget allocated significant resources to modernise the armed forces.

· Defence outlays increased to approximately ₹7.85 lakh crore, with a substantial portion earmarked for modernisation, aircraft and naval assets.

This signals India’s intent to strengthen its defence industrial base and reduce reliance on imports, consistent with the broader goal of strategic autonomy.

5. Financial Sector and Governance Reforms:

The Budget proposed several measures to deepen financial markets and improve regulatory frameworks:

· A market‑making framework for corporate bonds to enhance liquidity and investor participation.

· Incentives for municipal bond issuances to fund urban infrastructure.

· Review of FEMA rules to align regulations with evolving global capital flows.

· Customs reforms introducing trust‑based models and longer advance ruling validity.
These reforms aim to catalyse deeper capital markets and improve India’s global financial integration.

6. Fiscal Sustainability and Long‑term Outlook:

Fiscal discipline remains a central theme. The targeted 4.3% fiscal deficit balances developmental needs with macroeconomic stability. By anchoring fiscal consolidation goals and keeping public debt in check, the Budget seeks to ensure that India’s investment‑led trajectory is sustainable over the long term.

Conclusion:

The Union Budget 2026–27 reflects an intricate balancing act: fostering high growth, enhancing competitiveness, and maintaining fiscal responsibility. Its focus on infrastructure, strategic manufacturing, tax reforms, and human capital aligns with India’s larger vision of becoming a $30‑trillion economy by 2047. While execution challenges remain, particularly in large‑scale infrastructure and regulatory implementation, the Budget lays a cohesive roadmap integrating growth, inclusion, and reform.