Union Budget 2026: Sitharaman's Plan for Growth Amid Global Risks

Introduction to Union Budget 2026-27

Finance Minister Nirmala Sitharaman is set to present the Union Budget for the financial year 2026-27 in the Lok Sabha on Sunday, February 1, 2026. This marks her ninth consecutive budget presentation, a significant milestone in India's parliamentary history. As the third budget of the Narendra Modi government's third term, it is expected to lay out a comprehensive economic and fiscal roadmap for the upcoming year. The presentation, scheduled for 11 a.m., will be closely watched by investors, industries, and the general public for policy signals on growth, employment, and fiscal stability. Following the Lok Sabha presentation, a copy of the budget will be tabled in the Rajya Sabha.

Economic Context and Pre-Budget Consultations

The budget is being presented against a backdrop of steady domestic growth but persistent global headwinds, including geopolitical tensions and tariff volatility. The Economic Survey 2025-26, tabled earlier in the week, projected India's economy to grow by 7.4% in the current fiscal year (FY26) and between 6.8% and 7.2% in FY27. This positions India as the fastest-growing major economy. The survey also highlighted that inflation has been managed effectively, primarily through supply-side improvements. In preparation for the budget, the Finance Minister engaged in extensive pre-budget consultations with a wide range of stakeholders, including economists, trade unions, and representatives from the agriculture, MSME, and financial sectors to gather diverse inputs.

Key Expectations and Fiscal Projections

Market participants and economists anticipate a budget that balances growth imperatives with fiscal prudence. A primary focus will be on the government's fiscal deficit target, which is expected to be set around 4.2% of GDP for 2026-27, down from the current year's 4.4%. To finance its expenditure, the government's gross borrowing is projected to be between ₹16 lakh crore and ₹16.8 lakh crore. A significant push in capital expenditure is also expected, with allocations likely to increase to around ₹12 lakh crore from ₹11.2 lakh crore, maintaining capex at approximately 3.1% of GDP. While there are widespread hopes for tax relief, significant cuts in personal income tax slabs are considered unlikely, given the revenue impact of previous tax reductions.

Sectoral Focus Areas

The budget is expected to prioritize several key sectors to sustain economic momentum. Infrastructure, including railways and roadways, is likely to receive substantial allocations to continue the government's capital expenditure drive. The defence sector may see an increased outlay of up to 20% in light of regional security dynamics. To boost domestic manufacturing and reduce import dependency, further support through Production Linked Incentive (PLI) schemes is anticipated. Additionally, measures to support Micro, Small, and Medium Enterprises (MSMEs), enhance job creation, and promote agricultural development are expected to be central themes of the Finance Minister's speech.

The Finance Ministry's Core Team

Finance Minister Nirmala Sitharaman is supported by a team of experienced secretaries in the budget preparation process. This core team includes Economic Affairs Secretary Anuradha Thakur, Revenue Secretary Arvind Shrivastava, Expenditure Secretary Vumlunmang Vualnam, Financial Services Secretary M. Nagaraju, DIPAM Secretary Arunish Chawla, and Chief Economic Adviser V. Anantha Nageswaran. Their collective expertise is crucial in navigating the complexities of the Indian economy and formulating a balanced budget.

Special Market Session on Budget Day

In a notable arrangement, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) will conduct a special live trading session on Sunday, February 1. This allows the market to react to the budget announcements in real time. However, specific trading rules will apply due to it being a settlement holiday. For instance, stocks purchased on the preceding Friday cannot be sold during the special session, and proceeds from Friday's sales will not be available until Monday. This measure ensures that investors and traders can immediately factor in the policy implications of the budget.

Accessing Official Budget Documents

To ensure wide accessibility, all official budget documents will be made available digitally immediately after the Finance Minister concludes her speech. The public can download key documents, including the Annual Financial Statement, Finance Bill, and Budget at a Glance, through the official Union Budget Mobile App and the Union Budget Web Portal (indiabudget.gov.in). This digital-first approach promotes transparency and allows citizens to engage directly with the government's financial plans.

Conclusion: A Balancing Act for a Growing Economy

The Union Budget 2026-27 is poised to be a critical policy statement that aims to fortify India's economic resilience. It will likely navigate a fine line between boosting public spending to support growth and adhering to a path of fiscal consolidation to maintain macroeconomic stability. The announcements will be crucial in shaping investor sentiment, guiding sectoral growth, and addressing the aspirations of a large and diverse population. Following the presentation, the budget proposals will be debated extensively in Parliament, with the Finance Minister scheduled to reply to discussions on February 11.