Union Budget 2026 key features:
Reforms, manufacturing & fiscal discipline take centre stage

Feb 1, 2026

Synopsis
Union Budget 2026 Key Features: India's Fiscal Budget 2026-27 focuses on growth and manufacturing. Key initiatives include chip production and support for MSMEs. The budget also targets services, agriculture, and infrastructure. Fiscal consolidation remains a priority. This budget signals a reform-heavy, investment-led strategy for long-term capacity building.

Union Budget 2026–27 was tabled Sunday by Finance Minister Nirmala Sitharaman, laying out a policy roadmap that prioritises sustained economic growth, domestic manufacturing, infrastructure expansion and fiscal consolidation, while steering clear of broad-based populism.

Framed as an “action over ambivalence” Budget, the government positioned this year’s exercise as a continuation of structural reforms aimed at building resilience, improving productivity and preparing the economy for long-term stability.

The Budget is anchored around the goal of Viksit Bharat, with a stated focus on people-centric development, trust-based governance, ease of doing business and fiscal prudence, even as India targets growth of around 7% amid moderate inflation and global uncertainty.

Manufacturing push across strategic and frontier sectors

A major pillar of Budget 2026–27 is a renewed and expanded push to strengthen domestic manufacturing, particularly in high-value and technologically advanced sectors. The government announced multiple sector-specific schemes aimed at reducing import dependence and building industrial depth.

Key manufacturing initiatives include:

• India Semiconductor Mission (ISM) 2.0, signalling continued focus on chip manufacturing and ecosystem development.

• Electronics Components Manufacturing Scheme, aimed at deepening local value addition.

• Biopharma SHAKTI, targeting pharmaceutical and biotechnology capabilities.

• Three dedicated chemical parks to expand domestic chemical production.

• A scheme for rare earth permanent magnets, covering research, mining, processing and manufacturing.

• A container manufacturing scheme and initiatives for construction and infrastructure equipment.

• An integrated programme for textiles and a dedicated push for affordable sports goods manufacturing.

• Revival of 200 legacy industrial clusters, alongside the setting up of hi-tech tool rooms in CPSEs.

To support these efforts, the Budget proposed a series of customs and tax measures for manufacturers, including five-year income tax exemptions for non-residents supplying capital goods to toll manufacturers in bonded zones, deferred duty payments for trusted manufacturers, and expanded duty-free imports for export-oriented sectors such as seafood, footwear, textiles and electronics.

MSMEs: Credit, liquidity and professional support

The Budget outlined a three-pronged strategy to help MSMEs scale up as “champions”, focusing on equity support, liquidity and compliance assistance.

• A ₹10,000 crore SME Growth Fund and a ₹2,000 crore top-up to the Self-Reliant India Fund.

• Mandatory use of TReDS for all CPSE purchases from MSMEs, with plans to benchmark it for the wider corporate sector.

• Credit guarantee support through CGTMSE for invoice discounting on TReDS.

• Linking GeM with TReDS to enable faster and cheaper financing.

• Securitisation of TReDS receivables to create a secondary market and improve liquidity.

• Development of “Corporate Mitras” in Tier II and Tier III towns to help MSMEs meet compliance requirements at lower cost.

• In a move to encourage exports by small firms, the Budget removed the existing ₹10 lakh per consignment value cap on courier exports.

Services sector, health, education and the “orange economy”

Recognising services as a core growth driver, Budget 2026–27 announced targeted interventions across healthcare, education, tourism, design, sports and digital content.

Notable announcements include

• Support for states to set up five hubs for medical value tourism in partnership with the private sector.

• A high-powered Education-to-Employment and Enterprise Committee focused on the services sector.

• Expansion of allied health professional institutions and training of 1.5 lakh multi-skilled caregivers.

• Strengthening the AYUSH ecosystem, including three new All India Institutes of Ayurveda.

• Setting up AVGC content creator labs in 15,000 secondary schools and 500 colleges.

• A new National Institute of Design in eastern India.

• An integrated Khelo India Mission for talent development and sports infrastructure.

Education-linked infrastructure was also emphasised, with plans for five university townships near industrial corridors, girls’ hostels in STEM institutions in every district, and upgraded telescope infrastructure facilities.

Agriculture and allied sectors: Productivity over subsidies

The Budget reiterated a shift towards productivity-led growth in agriculture and allied sectors. Measures were announced across fisheries, horticulture, animal husbandry and high-value crops.

Key initiatives include

• Integrated development of 500 reservoirs and Amrit Sarovars.

• Strengthening fisheries value chains and market linkages, including support for women-led groups and FPOs.

• Dedicated programmes for coconut, cashew, cocoa, sandalwood and horticulture.

• Capital subsidy-linked support for private investment in veterinary colleges, hospitals and diagnostic facilities.

• Use of AI through Bharat-VISTAAR, integrating AgriStack portals with ICAR agricultural practices.

Infrastructure, urbanisation and energy security

Public capital expenditure remains central to the growth strategy. The Budget announced a series of infrastructure measures spanning transport, logistics, urban development and energy.

Highlights include

• Setting up an Infrastructure Risk Guarantee Fund to provide partial credit guarantees.

• New Dedicated Freight Corridors connecting Dankuni in the east to Surat in the west.

• Operationalising 20 new National Waterways and building a ship repair ecosystem.

• A Coastal Cargo Promotion Scheme to double the share of inland waterways and coastal shipping by 2047.

• ₹2 lakh crore support to states under the SASCI scheme.

• Focus on Tier II and Tier III cities and the creation of City Economic Regions, including seven high-speed rail corridors.

Energy security measures included continued customs duty exemptions for nuclear power projects, incentives for battery energy storage systems, biogas blending, and critical mineral processing.

Tax, financial sector and governance reforms

On the tax front, the Budget introduced extensive ease-of-living and compliance-reduction measures, including lower TCS rates under LRS, exemptions on tribunal-awarded compensation, automated processes for lower TDS certificates, extended timelines for filing and revising returns, and one-time foreign asset disclosure for small taxpayers.

For the financial sector, announcements included higher securities transaction tax on derivatives, incentives for large municipal bond issuances, restructuring of PFC and REC, a review of FEMA rules, and the introduction of market-making frameworks for corporate bonds.

Customs administration was set to move towards a trust-based model, with longer advance ruling validity, enhanced duty deferral for authorised operators, and a warehouse operator–centric framework.

Fiscal consolidation remains intact

Crucially, Budget 2026–27 reaffirmed the government’s commitment to fiscal consolidation.

The fiscal deficit is estimated at 4.3% of GDP, down from 4.4% in the previous year, with a stated medium-term target of bringing the debt-to-GDP ratio to 50% (±1%) by 2030. Transfers to states remain substantial, with ₹1.4 lakh crore provided as Finance Commission grants.

Taken together, Union Budget 2026–27 signals continuity over disruption -- a reform-heavy, investment-led strategy that prioritises long-term capacity building over short-term giveaways, while keeping fiscal discipline firmly in view.

[The Economic Times]