Union Budget 2026: Capex Boosted to ₹12.2 Lakh Crore to Drive Growth

Introduction

Finance Minister Nirmala Sitharaman presented the Union Budget for 2026-27 on Sunday, outlining the government's fiscal strategy amid a challenging global economic environment. In her ninth consecutive budget speech, which lasted 1 hour and 25 minutes, she emphasized a continued commitment to fiscal discipline, sustained growth, and inclusive development. The budget is structured around three core principles or 'kartavyas': accelerating economic growth, fulfilling the aspirations of the people, and ensuring inclusive access to resources and opportunities for all sections of society.

Fiscal Consolidation Path

The government reiterated its commitment to fiscal prudence. The fiscal deficit for the Revised Estimates (RE) of 2025-26 was maintained at 4.4% of GDP, meeting the target set earlier. For the upcoming fiscal year 2026-27, the deficit is projected to be further reduced to 4.3% of GDP. This aligns with the government's long-term goal of bringing the fiscal deficit below 4.5% of GDP by 2025-26, a commitment that the Finance Minister stated has been fulfilled. The debt-to-GDP ratio is also projected to decline, estimated at 55.6% for 2026-27, down from 56.1% in the revised estimates for 2025-26. This reduction is expected to free up resources for priority sector spending by lowering interest payment obligations.

Key Budgetary Figures

A clear picture of the government's financial planning is evident from the budget estimates. For 2026-27, total expenditure is estimated at ₹53.5 lakh crore, with non-debt receipts projected at ₹36.5 lakh crore. Net tax receipts for the Centre are estimated to be ₹28.7 lakh crore. To finance the fiscal deficit, net market borrowings are pegged at ₹11.7 lakh crore, while gross market borrowings are estimated at ₹17.2 lakh crore.

A Six-Point Growth Agenda

The budget lays out a six-pronged strategy to accelerate and sustain economic growth. This roadmap focuses on:

1. Scaling up manufacturing in seven strategic and frontier sectors.
2. Rejuvenating legacy industrial sectors.
3. Creating 'Champion MSMEs'.
4. Delivering a powerful push to infrastructure.
5. Ensuring long-term energy security and stability.
6. Developing City Economic Regions.

This strategy underscores the government's intent to build domestic capacity, reduce import dependency, and enhance competitiveness on a global scale.

Infrastructure and Capital Expenditure

Continuing its focus on public investment as a primary growth driver, the government has significantly increased the capital expenditure (capex) outlay. For the fiscal year 2026-27, the capex target has been set at ₹12.2 lakh crore, a substantial increase from the ₹11.2 lakh crore allocated in the previous budget. This investment will be directed towards developing infrastructure, particularly in Tier II and Tier III cities, which are emerging as new centres of economic growth. The budget also proposes to accelerate the monetization of real estate assets held by Central Public Sector Enterprises (CPSEs) by setting up dedicated Real Estate Investment Trusts (REITs).

Empowering MSMEs and Strategic Sectors

The budget introduces several measures to support Micro, Small, and Medium Enterprises (MSMEs), recognizing them as a vital engine of growth. A dedicated ₹10,000 crore SME Growth Fund will be established to incentivize and create future 'Champion' enterprises. Additionally, the Self-Reliant India Fund, set up in 2021, will receive a top-up of ₹2,000 crore to continue providing risk capital to micro-enterprises. In strategic manufacturing, the 'Biopharma SHAKTI' initiative was announced with an outlay of ₹10,000 crore over five years to position India as a global biopharma manufacturing hub. The India Semiconductor Mission will also be expanded to fortify supply chains and promote industry-led research.

Financial and Tax Reforms

On the financial sector front, the budget proposes a comprehensive review of the Foreign Exchange Management (Non-debt Instruments) Rules to create a more user-friendly framework for foreign investment. A high-level committee will also be set up to review the banking sector and align it with the country's future growth needs. A significant announcement was made regarding direct taxes. The new Income Tax Act, 2025, will come into effect from April 1, 2026, replacing the decades-old Income Tax Act, 1961. The Finance Minister assured that simplified rules and forms would be notified shortly to allow taxpayers adequate time to adapt to the new system.

Conclusion

The Union Budget 2026-27 presents a balanced approach, prioritizing fiscal consolidation while simultaneously pushing for growth through targeted capital expenditure and strategic reforms. By focusing on infrastructure, manufacturing, and MSMEs, the government aims to build a resilient economy capable of navigating global uncertainties. The roadmap laid out is a clear continuation of its long-term vision for a 'Viksit Bharat', aiming to transform economic potential into tangible performance and ensure that the benefits of growth are widely distributed.