India's Union Budget 2026-2027: A Bold Blueprint for Viksit Bharat

 

India's Union Budget 26-27: A Bold Blueprint for Viksit Bharat

Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27 on February 1, marking a significant milestone on India's path toward becoming a developed nation by 2047. This budget, presented against the backdrop of global economic instabilities and trade interruptions, reflects an even-handed approach between fiscal discipline and ambitious growth targets.

    Source: AI Generated 

The Fiscal Roadmap: Walking the Tightrope

The government has demonstrated its pledge to fiscal prudence by targeting a fiscal deficit of 4.3% of GDP for 2026-27, down from 4.4% in the revised estimates for 2025-26. (India's budget boosts infrastructure spending while vowing fiscal discipline, 2026) This marks a progression of the fiscal consolidation path announced in FY 2021-22, which aimed to bring the deficit below 4.5%. (India's budget boosts infrastructure spending while vowing fiscal discipline, 2026)

More importantly, the budget includes a new fiscal anchor: the debt-to-GDP framework. The government intends to achieve a Central Government debt-to-GDP ratio of 50% (±1%) by March 2031. For the current financial year, this ratio is projected at 55.6%, down from 56.1% in 2025-26. (Upasani, 2026)

With nominal GDP growth estimated at 10% and real GDP growth projected between 6.8-7.2%, India continues to position itself as the world's fastest-growing major economy. (India's Gross Domestic Product (GDP) pegged at 6.4% in 2026, to remain the fastest-growing economy till next year despite global slowdown: Report, 2025) The government's fiscal strategy reconciles growth requirements with responsible economic management, particularly given the volatile global environment.

The Three Kartavyas: Guiding Principles

Finance Minister Sitharaman outlined three fundamental duties (kartavyas) that shape this budget:

1. Accelerating sustainable economic growth by improving productivity, competitiveness, and toughness
2. Building capacity and fulfilling aspirations through human capital development and institutional strengthening
3. Advancing inclusive development (Sabka Sath, Sabka Vikas), guaranteeing equitable opportunities throughout regions and communities

Manufacturing Renaissance: Seven Strategic Sectors

The budget places unprecedented emphasis on scaling up manufacturing in seven strategic and frontier sectors:

Biopharma SHAKTI (Strategy for Healthcare Advancement through Knowledge, Technology & Innovation) is remarkable for an allocation of ₹10,000 crore over five years. (Union Budget 2026: 'Bio Pharma Shakti' gets Rs 10,000 crore over five years, FM Sitharaman’s big push, 2026) This initiative aims to establish India as a global biopharmaceutical manufacturing hub, focusing on the production of biologics and biosimilars. The program includes establishing three new National Institutes of Pharmaceutical Education and Research (NIPERs) and upgrading seven existing institutes.

Semiconductor Mission 2.0 expands India's semiconductor capabilities, building on the base established by the earlier mission. The Electronics Components Manufacturing Scheme receives an enhanced outlay of ₹40,000 crore, recognizing the key role of component manufacturing in the electronics value chain. (Das, 2026)

A particularly forward-looking initiative involves establishing dedicated rare-earth corridors in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu to promote mining, processing, and research of rare-earth minerals—essential to modern technology and defense applications. (Budget 2026: Rare-earth hubs to be set up in Odisha, Kerala, Andhra, TN, 2026)

Digital India Gets a Global Boost

Perhaps one of the most investor-friendly announcements is the tax holiday extended until 2047 for foreign companies providing global cloud services through Indian data centers. This positions India as a competitive destination for hyperscale data center investments, with a safe harbor provision offering a 15% cost allowance if the data center service provider is a related entity.

The budget also proposes a five-year tax exemption for non-residents who provide capital goods, equipment, or tooling to toll manufacturers in bonded zones, thereby further incentivizing manufacturing partnerships.

GIFT City: India's Financial Hub Ambitions

The government has substantially boosted the International Financial Services Centre (IFSC) at GIFT City by extending the tax holiday from 10 to 20 years, followed by a concessional tax regime. (Union Budget 2026-27: Centre doubles GIFT City tax holiday to 20 years, 2026) This long-term policy certainty aims to attract sustained foreign capital and high-value financial services, positioning India as a global financial hub.

Individual Persons Resident Outside India (PROIs) will now be permitted to invest in equity instruments, while new provisions support corporate bonds and municipal bonds, deepening India's capital markets.

Tax Reforms: Simplification and Compliance

While income tax slabs remain unchanged for both old and new tax regimes, the budget introduces several notable tax reforms:

• Minimum Alternate Tax (MAT) reduced from 15% to 14% from tax year 2026-27 onwards (Union Budget 2026: Taxpayers, investors, consumers — who gains, who hurts?, 2026)
• Companies opting for the concessional tax regime can set off 25% of available MAT credit against tax liability
• Securities Transaction Tax (STT) increased on futures (from 0.02% to 0.05%) and options (to 0.15%) to curb excessive speculation (Tiwari, 2026)
• Tax Collection at Source (TCS) rates rationalized to 2% for sellers of specific goods, including alcoholic liquor, scrap, and minerals
• Buyback taxation revised, making it taxable as capital gains with effective tax rates of 22% for corporate promoters and 30% for non-corporate promoters

A Joint Committee of the Ministry of Corporate Affairs and the Central Board of Direct Taxes will incorporate the Income Computation and Disclosure Standards (ICDS) requirements into the Indian Accounting Standards (IndAS), eliminating duplicate accounting from tax year 2027-28.

Capital Expenditure: Powering Infrastructure

Public capital expenditure is budgeted at ₹12.2 lakh crore for FY27, indicating the government's continued focus on infrastructure development. (India's budget boosts infrastructure spending while vowing fiscal discipline, 2026) This includes investments in freight corridors, national waterways (with 20 new waterways planned), high-speed rail, and urban infrastructure in tier-2 and tier-3 cities.

The emphasis on cities with populations above five lakh aims to produce a robust pipeline of revenue-generating infrastructure assets, notably benefiting Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs).

Social Sector and Inclusion

The budget demonstrates a strong devotion to inclusive growth:

• Health and Family Welfare Ministry receives ₹1,06,530.42 crore, nearly 10% higher than revised estimates for 2025-26 (Service, 2026)
• Divyang Kaushal Yojana proposed to provide customized training for persons with disabilities in IT, animation, visual graphics, gaming, comics (AVGC), and hospitality sectors
• Significant allocations for Scheduled Castes, Scheduled Tribes, and the North Eastern Region
• 500 reservoirs and Amrit Sarovars to be developed for the coastal fisheries value chain strengthening
• Khelo India Mission to transform the sports sector over the next decade

Revenue Mobilization and Devolution

Gross tax revenue is budgeted at ₹44.04 lakh crore, representing 8% growth over revised estimates for 2025-26. Direct taxes contribute 61.2% (₹26.97 lakh crore), whereas indirect taxes account for ₹17.07 lakh crore. (Desk, 2026)

The central government will transfer ₹26,20,769 crore to states in 2026-27—a 12.2% increase over 2025-26. This includes tax devolution of ₹15,26,255 crore and grants and loans worth ₹10,94,514 crore, with ₹1,85,000 crore allocated as capital expenditure loans to states. (Centre Releases ₹1.73 Trillion to States to Boost Capital Spending, 2025)

The government has accepted the 16th Finance Commission's recommendation to retain the vertical share of devolution at 41%. (16th Finance Commission retains 41% devolution, introduces GDP criterion, 2026)

The Road Ahead: Harmonizing Growth and Prudence

Union Budget 2026-27 presents a mature and confidence-driven policy stance. While it prioritizes fiscal consolidation and structural reform, some economists question whether the 6% growth in total government expenditure is adequate to support the ambitious 10% nominal GDP growth target.

With total expenditure budgeted at ₹51,29,844 crore (about 13% of GDP), the budget reflects consolidation and rationalization rather than expansive new programs. (India's budget boosts infrastructure spending while vowing fiscal discipline, 2026) The critical question remains: can private investment fill the gap if public spending growth remains modest?

Nevertheless, the budget's emphasis on manufacturing, digital infrastructure, skill development, and key sectors positions India well for long-term competitiveness. The extension of tax incentives, regulatory clarity, and focus on ease of doing business signal India's readiness to integrate more firmly with global value chains while building domestic capabilities.

As India navigates global trade uncertainties and supply chain realignments, Budget 2026-27 presents a roadmap that achieves immediate financial responsibility with extended growth aspirations—a subtle balance key for achieving Viksit Bharat by 2047.

The verdict? This budget may not offer dramatic headline-grabbing announcements, but it provides policy continuity, regulatory certainty, and strategic direction—ingredients that are often more valuable than populist measures for sustainable economic transformation.

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References

1. (February 1, 2026). India's budget boosts infrastructure spending while vowing fiscal discipline. AP News. https://apnews.com/article/e5bb3a3fd3800b44f65cab4a4e1ad0f7
2. (February 2, 2026). India's budget boosts infrastructure spending while vowing fiscal discipline. Associated Press. https://apnews.com/article/e5bb3a3fd3800b44f65cab4a4e1ad0f7
3. Upasani, S. (February 1, 2026). Centre targets lower debt-to-GDP ratio, pegs it at 55.6% in FY27. The Indian Express. https://indianexpress.com/article/business/in-new-debt-to-gdp-era-fy27-target-set-at-55-6-10507831/
4. (July 2, 2025). India's Gross Domestic Product (GDP) pegged at 6.4% in 2026, to remain fastest-growing economy till next year despite global slowdown: Report. IBEF. https://www.ibef.org/news/india-s-gross-domestic-product-gdp-pegged-at-6-4-in-2026-to-remain-fastest-growing-economy-till-next-year-despite-global-slowdown-report
5. (February 1, 2026). Union Budget 2026: 'Bio Pharma Shakti' gets Rs 10,000 crore over five years, FM Sitharaman’s big push. BusinessToday. https://www.businesstoday.in/union-budget/news/story/union-budget-2026-bio-pharma-shakti-gets-rs-10000-crore-over-five-years-fm-sitharamans-big-push-513892-2026-02-01/
6. Das, S. (February 1, 2026). Budget FY27: India approves second semiconductor scheme, electronics incentive increased to ₹40,000 crore. Mint. https://www.livemint.com/budget/budget-fy27-india-approves-second-semiconductor-scheme-electronics-incentive-increased-to-40-000-crore-11769925368780.html
7. (February 1, 2026). Budget 2026: Rare-earth hubs to be set up in Odisha, Kerala, Andhra, TN. Business Standard. https://www.business-standard.com/budget/news/budget-2026-rare-earth-corridors-odisha-kerala-andhra-pradesh-tamil-nadu-126020100275_1.html
8. (February 1, 2026). Union Budget 2026-27: Centre doubles GIFT City tax holiday to 20 years. Business Standard. https://www.business-standard.com/budget/news/centre-doubles-gift-city-tax-holiday-20-years-126020100926_1.html
9. (February 1, 2026). Union Budget 2026: Taxpayers, investors, consumers — who gains, who hurts?. The Times of India. https://timesofindia.indiatimes.com/business/india-business/union-budget-2026-taxpayers-investors-consumers-who-gains-who-hurts/articleshow/127852620.cms
10. Tiwari, K. (February 1, 2026). Union Budget 2026-27: STT increase on F&O to curb speculative trade. Business Standard. https://www.business-standard.com/markets/news/markets-fm-hikes-stt-on-fo-trades-surprise-move-126020100888_1.html
11. (February 1, 2026). India's budget boosts infrastructure spending while vowing fiscal discipline. AP News. https://apnews.com/article/e5bb3a3fd3800b44f65cab4a4e1ad0f7
12. Service, I. N. (February 1, 2026). Union Budget 2026: Enhanced Healthcare Allocations Explained. NDTV. https://www.ndtv.com/health/govt-allocates-rs-1-05-530-42-crore-for-health-in-budget-2026-10925099
13. Desk, R. M. (February 1, 2026). Budget 2026-27: Tax Revenue Breakdown. Rediff Moneynews. https://money.rediff.com/news/market/budget-2026-27-tax-revenue-breakdown/41173520260201
14. (January 10, 2025). Centre Releases ₹1.73 Trillion to States to Boost Capital Spending. Current Affairs Adda247. https://currentaffairs.adda247.com/centre-releases-%E2%82%B91-73-trillion-to-states-to-boost-capital-spending/
15. (February 1, 2026). 16th Finance Commission retains 41% devolution, introduces GDP criterion. Business Standard. https://www.business-standard.com/budget/news/16th-finance-commission-retains-41-percent-devolution-gdp-criterion-126020101042_1.html/
16. (February 1, 2026). India's budget boosts infrastructure spending while vowing fiscal discipline. AP News. https://apnews.com/article/e5bb3a3fd3800b44f65cab4a4e1ad0f7

Budget 2025-26: A Vision for Viksit Bharat

The much-anticipated Budget 2025-26, presented by Finance Minister Nirmala Sitharaman, lays out a roadmap for India's economic growth with a strong focus on agriculture, MSMEs, investment, and exports—the four engines driving India toward a developed future.

A Budget for Growth and Inclusivity

With the global economy facing uncertainties, India remains the fastest-growing major economy. This budget strengthens the government's commitment to inclusive development, private sector investments, and improving the financial well-being of households.

Key Budget Themes:

🔹 Economic Growth with Social Upliftment

🔹 Zero-Poverty and 100% School Education

🔹 Healthcare, Skilling, and Women’s Economic Participation

🔹 India as the Food Basket of the World

Major Announcements and Reforms

🚜 Agriculture & Rural Development

A landmark Prime Minister Dhan-Dhaanya Krishi Yojana will focus on enhancing agricultural productivity across 100 districts. Additional efforts include:

✅ Mission for Aatmanirbharta in Pulses – Self-sufficiency in pulses production

✅ National Mission on High Yielding Seeds – Advanced seed research for higher yields

✅ Makhana Board in Bihar – Boosting makhana production and exports

✅ Urea Plant in Assam – Strengthening fertilizer production

🏭 MSMEs: The Backbone of India’s Economy

MSMEs play a crucial role in employment and exports. The government has introduced:

✅ Revised MSME Classification – Investment and turnover limits raised

✅ Higher Credit Guarantee – From ₹5 crore to ₹10 crore for micro & small enterprises

✅ Startup Fund of Funds – ₹10,000 crore to boost innovation

✅ Focus on Footwear, Leather & Toy Sectors – Job creation and global competitiveness

💰 Investment in People & Innovation

India’s future hinges on a skilled workforce and innovation-driven growth:

✅ 50,000 Atal Tinkering Labs – Promoting STEM education in schools

✅ Broadband in Rural Schools & PHCs – Bridging the digital divide

✅ Centre of Excellence in AI for Education – Leveraging AI for learning

✅ 10,000 Additional Medical Seats – Strengthening healthcare education

⚡ Infrastructure & Energy Security

The budget places power and urban development at the core of growth:

✅ Nuclear Energy Mission for 100 GW by 2047 – Private sector participation

✅ Urban Challenge Fund of ₹1 Lakh Crore – Smart city development

✅ Public-Private Partnerships in Infrastructure – Strengthening connectivity

🌍 Boosting Exports & Global Trade

To establish India as a global manufacturing hub, the government will:

✅ Export Promotion Mission – Targeted sectoral support

✅ BharatTradeNet – A single digital platform for seamless trade

✅ Support for Global Supply Chain Integration – Expanding India’s industrial footprint

💸 Taxation & Fiscal Policies

Big relief for the middle class with a revised income tax structure:

✅ No tax on income up to ₹12 lakh

✅ Revised tax slabs for higher savings

✅ Simplification of GST and customs duty structures

A Future-Ready Budget

This reform-driven budget lays the foundation for India’s global competitiveness while ensuring the well-being of farmers, MSMEs, youth, and the middle class. With bold initiatives in technology, energy, infrastructure, and exports, India is well on its way to achieving Viksit Bharat by 2047.

Jai Hind! 🇮🇳

Expectations and wishlists from India Union Budget 2023.

1. Stimulus for economic recovery post-pandemic.
2. Increased spending on healthcare and education.
3. Tax reforms and simplification.
4. Boost for agriculture and rural development.
5. Measures to attract foreign investment.
6. Encouragement for entrepreneurship and job creation.
7. Infrastructural development and modernisation of cities.
8. Focus on environmental sustainability and clean energy.
9. Reforms in the banking and financial sector.
10. Increased allocation for social welfare programs.

 

Process of Preparing the Union Budget in India

The Union Budget of India is prepared by the Ministry of Finance, and presented by the Finance Minister in the Parliament on the last working day of February. The process of preparing the budget begins several months before the presentation date, with various government departments and agencies submitting their proposals for spending and revenue to the Ministry of Finance. These proposals are then reviewed and consolidated by the Ministry, and the final budget is presented to the Cabinet for approval before being presented to the Parliament. The budget includes estimates of government revenues and expenditures for the upcoming financial year, as well as proposals for taxes and other measures to achieve the government's economic and social objectives.

The process of preparing the Union Budget of India involves several steps:

1. The Ministry of Finance begins the budget-making process by issuing a budget circular, outlining the guidelines and instructions for the preparation of the budget.
2. Various government departments and ministries submit their budget estimates for the upcoming financial year to the Ministry of Finance.
3. The Ministry of Finance reviews and consolidates the budget estimates from all departments and ministries, and prepares a draft budget.
4. The draft budget is then presented to the Cabinet for review and approval.
5. After the Cabinet approves the budget, it is presented to the President of India, who then lays it before the Parliament.
6. The budget is then discussed and debated in both the Lok Sabha (House of the People) and Rajya Sabha (Council of States) before being passed.
7. Once the budget is passed, it is implemented on April 1, the beginning of the financial year in India.

Union Budget 2022 Highlights | All the action from FM Sitharaman’s announcements—as it happened

Last year’s budget had two engines of capital investments and reforms. This year’s budget has retained the focus on capital investments, but reforms have been replaced by a focus on domestic manufacturing. That may not be surprising because many of those reforms, such as the LIC divestment, identifying non-strategic companies and bank privatisation have no made much progress.

But, the Budget 2022-23 dashed expectations industry and investors had that it would spur consumption. FMCG industry data had pointed to a decline in rural consumption of essentials in the December quarter, partly due to higher prices but also reflecting income stress. But the finance minister did not announce any new schemes or enhance outlays of existing schemes that could have put more money in the hands of lower income consumers.

One reason for this approach could be to avoid doing anything that spurs inflation. In that respect, capital expenditure or increased domestic manufacturing are not pro-inflationary measures. In fact, more domestic manufacturing can create more supply that is good for lowering inflation. On the positive side, there were no new taxes or increase in taxes on individuals or companies. But the quest to support domestic manufacturing has meant higher customs duties, which will come out of the pockets of consumers eventually.

The total capital expenditure spent through the budget is projected to increase by 24.5 percent in 2022-23 but this picture changes when you consider the total capital expenditure—that is including resources of public enterprises. After doing that, the increase drops to 10.4 percent, which is good but not as aggressive as the budgetary number suggests. Even here, the revised estimate for FY22 for total capital expenditure came in a tad lower than the budgeted estimate. These investments are targeted in the infrastructure sector, with the PM GatiShakti umbrella scheme being the main driver encompassing sectors such as transport and utilities.

The government’s Atmanirbharta focus has been given a bigger push in the budget. One part of this is making it easier for businesses to operate, although these are governance measures that don’t really need to be in a budget. But measures such as supporting urban planning along with mass transit systems and setting up charging stations all result in domestic manufacturing opportunities. Similarly, the 5G rollout will be accompanied by a PLI scheme for domestic manufacturing. The budget proposes replacing the SEZ framework with a new framework that uses existing infrastructure. This theme runs through the budget in sectors such as defence and solar power.

But there is the problem of competitiveness of Indian industry against imports and that’s where the government has stepped in and taken several measures that will hike customs duty on several goods and also on project imports.

This marks a change in strategy as it was earlier considered that keeping duties on project imports low could help manufacturing industry become more competitive. But, now the government appears to have decided that it wants to encourage capital goods manufacturing also within the country. What this can do is increase the capital investment required to set up a project, which in turn could lead to higher production costs. This could work against the government’s intention of spurring industrial capex, however.

Both capex and a manufacturing renaissance will bring benefits over the longer run. In the near term, there remains the task of growth and balancing the budget. The government expects gross tax revenues to increase by 9.6 per during the year with contribution from both direct and indirect taxes—with the exception of excise duty where it has projected a decline. This seems achievable given FY22's performance despite Omicron's effect.

Since the increase in expenditure is more modest, the fiscal deficit is expected to decline by 50 basis points to 6.4 percent of GDP. While the bond market may have been upset as it has resulted in a higher gross market borrowing, the equity markets seem to have been happy with the budget. Maybe, they are looking at the brighter side, that it did no harm and that its support for domestic industry should see cyclicals benefit.