Finance Minister Nirmala Sitharaman on February 1 presented the Union Budget 2026-27 in Parliament, outlining the government’s economic roadmap with a strong focus on capital expenditure, manufacturing, employment generation, and long-term fiscal stability.
The budget aims to balance growth and prudence at a time of global economic uncertainty, while reinforcing India’s push to become a resilient and competitive economy.
Fiscal Position and Economic Outlook
The government projected a fiscal deficit of 4.3 per cent of GDP for FY 2026-27, continuing its gradual consolidation path. The budget reaffirmed the commitment to maintain macroeconomic stability while supporting growth through public investment.
Nominal GDP growth assumptions remain optimistic, driven by infrastructure spending, private investment recovery, and domestic consumption.
Income Tax: No Slab Changes, New Law Announced
The Finance Minister announced no changes to personal income tax slabs in both the old and new tax regimes. However, a major structural reform was unveiled with the introduction of a new Income Tax Act, set to replace the existing law from April 1, 2026.
The new legislation is aimed at simplifying compliance, reducing litigation, and making tax provisions easier to understand. Several procedural changes were also announced to rationalise penalties and decriminalise select technical offences.
Big Push for Infrastructure and Capital Expenditure
Capital expenditure was increased to ₹12.2 lakh crore, reinforcing the government’s strategy of using public investment as a growth driver. Key focus areas include highways, railways, logistics, urban transport, and digital infrastructure.
The budget also announced expansion of high-speed rail corridors and continued support for metro and multimodal transport projects across states.
Manufacturing and Strategic Sectors Get Boost
The government unveiled targeted initiatives to strengthen India’s position in critical sectors:
- A dedicated outlay for biopharmaceutical manufacturing to support domestic production of biologics and biosimilars
- Expanded funding under the Semiconductor Mission 2.0 to develop chip fabrication, equipment, and supply chains
- Enhanced incentives for electronics components manufacturing to reduce import dependence
These measures align with India’s broader goal of strategic self-reliance in critical technologies.
MSMEs, Startups and Employment
Recognising the role of small businesses in job creation, the budget announced a growth fund for MSMEs to support scaling, technology adoption, and access to finance. Credit guarantee coverage was expanded, and compliance processes were further simplified.
Skill development programmes were aligned with industry demand, with renewed focus on future-ready skills in manufacturing, AI, and digital services.
Agriculture and Rural Economy
The budget introduced targeted schemes to boost farm incomes and rural livelihoods. Special programmes were announced for high-value crops, plantation agriculture, and allied sectors. Support for agri-infrastructure and rural value chains was also strengthened.
The government reiterated its commitment to improving productivity, market access, and income stability for farmers.
Healthcare and Social Sector Announcements
Healthcare received additional allocations for strengthening public health infrastructure and expanding access to affordable treatment. Customs duty exemptions were announced for select life-saving drugs to reduce costs for patients.
In education, the budget proposed setting up girls’ hostels in every district and expanding higher education capacity to improve access and inclusion.
Trade, Travel and Consumer Relief
The Finance Minister announced rationalisation of tax collection at source (TCS) on overseas remittances related to education and travel, providing relief to students and families.
Customs duty changes were introduced to support exports, improve ease of trade, and reduce costs for domestic manufacturers in select sectors.
States’ Share and Federal Finances
The Centre retained the 41 per cent share of divisible tax pool for states, maintaining continuity in fiscal federalism while ensuring sufficient resources for national priorities.
Overall Direction
The Union Budget 2026-27 positions infrastructure, manufacturing, and human capital as the pillars of India’s next phase of growth. With no immediate tax relief for individuals, the focus remains on long-term reforms, job creation, and strengthening India’s economic fundamentals amid global volatility.
