Union Budget 2026: A ₹12.2 Lakh Crore Push for Manufacturing and Infra

Finance Minister Nirmala Sitharaman presented her ninth consecutive Union Budget on February 1, 2026, outlining the government's economic roadmap for the financial year 2026-27. In her address, she emphasized a commitment to 'reforms over rhetoric,' positioning the budget as a foundational step towards building a 'Viksit Bharat' or developed India. The core message centered on sustained structural reforms, fiscal prudence, and inclusive growth, ensuring that the benefits reach all sections of society, including farmers, youth, and underprivileged communities.

A Six-Pronged Strategy for Growth

The Finance Minister introduced a focused six-part intervention plan designed to accelerate economic momentum. This strategy includes scaling up manufacturing in strategic sectors, rejuvenating legacy industrial clusters, creating champion MSMEs, delivering a significant push for infrastructure, ensuring long-term security, and developing city economic regions. This comprehensive approach signals the government's intent to address multiple facets of the economy simultaneously, from modernizing traditional industries to fostering futuristic growth engines.

Manufacturing and Technology at the Forefront

A significant portion of the budget is dedicated to strengthening India's domestic manufacturing capabilities. The outlay for electronics manufacturing is set to be increased to ₹40,000 crore in FY27. Building on the momentum of the India Semiconductor Mission, the budget proposes to increase its outlay to ₹40,000 crore to support industry-led research and training. To reduce import dependency, three dedicated chemical parks will be established. Further, the budget announced the 'Biopharma Shakti' programme with an allocation of ₹10,000 crore over five years to position India as a global biopharma manufacturing hub, with a focus on non-communicable diseases.

Infrastructure Gets a Record Boost

Continuing its focus on infrastructure-led growth, the government has proposed increasing capital expenditure to ₹12.2 lakh crore for FY27, up from ₹11.2 lakh crore in the previous year. This investment aims to maintain growth momentum, with a special focus on developing Tier 2 and Tier 3 cities. A major announcement was the development of seven high-speed rail corridors connecting key economic hubs like Mumbai-Pune, Hyderabad-Bengaluru, and Delhi-Varanasi. Additionally, a new dedicated east-west freight corridor will connect Dankuni with Surat. To enhance logistical efficiency, 20 new waterways are planned to be operationalized over the next five years. To encourage private sector involvement, an infrastructure risk guarantee fund will be set up to provide partial credit guarantees during the construction phase of projects.

Empowering MSMEs and Traditional Industries

The budget lays out a three-pronged strategy to support Micro, Small, and Medium Enterprises (MSMEs). A new ₹10,000 crore SME Growth Fund will be established to help promising firms scale up based on performance-linked incentives. The Self-Reliant India Fund will receive an additional ₹2,000 crore to support micro-enterprises. The government also plans to rejuvenate 200 traditional industrial clusters facing financial stress. To improve liquidity and ensure timely payments, the TReDS platform will be made mandatory for all purchases from MSMEs by Central Public Sector Enterprises (CPSEs). A new cadre of 'corporate mitras' will be developed to help MSMEs with compliance at affordable costs.

Key Allocations in Union Budget 2026

Deepening the Financial Sector

Several measures were announced to strengthen India's financial architecture. A high-level committee on ‘Banking for Viksit Bharat’ will be established to review the sector and align it with the country's future growth needs. Public sector financial institutions like the Power Finance Corporation (PFC) and REC Ltd will be restructured. To deepen capital markets, a market-making framework for corporate bonds will be introduced. The municipal bond market will also be strengthened with incentives for large issuances. In a significant move to attract foreign investment, the rules for the Portfolio Investment Scheme are being eased, allowing individuals residing abroad to invest in Indian equities and increasing the investment limits for them from 5% to 10% individually and from 10% to 24% collectively per company.

Strategic Push in Critical Minerals

Recognizing the importance of critical minerals for future technologies, the budget proposes the creation of 'rare earth corridors' in mineral-rich states like Odisha, Kerala, Andhra Pradesh, and Tamil Nadu. This initiative will support the establishment of facilities for mining, processing, and research, enhancing India's self-reliance in this strategic sector. This builds upon the Scheme for Rare Earth Permanent Magnets launched in late 2025.

Conclusion: A Roadmap for Long-Term Growth

The Union Budget 2026-27 presents a clear focus on supply-side reforms, aiming to bolster the country's manufacturing and infrastructure backbone. By prioritizing capital expenditure and creating targeted schemes for strategic sectors like semiconductors, biopharma, and rare earths, the government is laying the groundwork for sustainable, long-term economic expansion. The emphasis on financial sector reforms and MSME empowerment further aims to create a robust and inclusive growth environment, aligning with the overarching vision of a developed India.