Budget 2026: Sitharaman's Six-Point Plan to Boost Growth

Introduction to Union Budget 2026

Finance Minister Nirmala Sitharaman presented her ninth consecutive Union Budget on February 1, 2026, outlining a strategic six-point roadmap designed to accelerate and sustain India's economic growth. The budget emphasizes a clear focus on manufacturing, infrastructure development, and comprehensive financial sector reforms. Positioning these as the core drivers for the nation's journey towards 'Viksit Bharat', the minister stressed that the government's priority is growth-led development, ensuring the benefits reach all sections of society, including farmers, youth, and underprivileged communities.

The Six-Pillar Economic Strategy

The government's agenda is built upon six key pillars. The first is scaling up manufacturing in strategic and frontier sectors. The second involves rejuvenating legacy industrial sectors to enhance their competitiveness. Third, the budget aims to create 'champion MSMEs' capable of scaling and competing globally. The fourth pillar is a powerful push for infrastructure to support economic expansion. Fifth, the plan focuses on ensuring long-term security and stability. Finally, the sixth pillar involves developing city economic regions to act as new hubs of growth.

A Renewed Push for Manufacturing

A central element of the budget is the significant emphasis on boosting domestic manufacturing. The government plans to scale up production in health, electronics, semiconductors, chemicals, and capital goods. A key announcement in this area is the 'Biopharma Shakti' initiative, a strategy for health advancement through knowledge, technology, and innovation. With an outlay of Rs 10,000 crore over five years, this program aims to establish India as a global biopharma manufacturing hub, focusing on biologics and biosimilars to address the rising burden of non-communicable diseases.

Strengthening Semiconductors and Electronics

Building on existing initiatives, the budget launches 'India Semiconductor Mission 2.0' to produce equipment and fortify supply chains. This includes establishing industry-led research and training centers to develop a skilled workforce. In electronics, the outlay for manufacturing is set to increase to Rs 40,000 crore. The government will also support mineral-rich states like Odisha, Kerala, Andhra Pradesh, and Tamil Nadu in establishing facilities for critical minerals, essential for high-tech manufacturing.

Enhancing Industrial Capacity

To reduce import dependency, the budget proposes a scheme to support states in establishing three dedicated chemical parks based on a cluster model. For the capital goods sector, high-tech tool rooms will be established by Central Public Sector Enterprises at two locations to manufacture high-precision components. Additionally, new schemes will be introduced to strengthen the domestic manufacturing of construction equipment and promote a globally competitive container manufacturing ecosystem.

Comprehensive Financial Sector Reforms

The budget signals a major overhaul of the financial sector. A high-level committee will be established to conduct a comprehensive review of the banking sector, aligning it with India's next phase of growth while safeguarding stability and consumer protection. As part of strengthening public sector financial institutions, the government announced a proposal to restructure Power Finance Corporation (PFC) and REC Ltd. This move is intended to improve credit delivery and efficiency in the power and infrastructure lending ecosystem.

Deepening Capital Markets

To improve liquidity and participation in the corporate debt market, the budget proposes the introduction of a market-making framework for corporate bonds. The municipal bond market will also be strengthened through measures like total return swaps. An incentive of Rs 100 crore will be provided for single municipal bond issuances exceeding Rs 1,000 crore by larger cities. Furthermore, a comprehensive review of the Foreign Exchange Management (Non-Debt Instruments) Rules is planned to create a more facilitative framework for foreign equity investments.

Empowering MSMEs for Growth

Recognizing Micro, Small, and Medium Enterprises (MSMEs) as a key growth engine, the budget outlines a multi-pronged strategy to help them scale. A Rs 10,000 crore SME Growth Fund will be established to incentivize enterprises based on scale, efficiency, and technology. To improve liquidity, four new measures will be introduced to leverage the TReDS platform, including mandating it for all CPSE purchases from MSMEs. Additionally, a cadre of 'corporate mitras' will be developed through professional institutions to help MSMEs meet compliance requirements at affordable costs.

Sustained Infrastructure Investment

The government continues its focus on infrastructure, proposing to increase the capital expenditure outlay to Rs 12.2 lakh crore for FY27. This represents a significant step up from the Rs 2 lakh crore spent in 2014-15 and is aimed at maintaining growth momentum. The investment will particularly focus on developing infrastructure in Tier 2 and Tier 3 cities. To encourage private participation, an infrastructure risk guarantee fund will be set up to provide partial credit guarantees during the construction phase of projects.

Market Reaction and Outlook

The budget announcements were received positively by the stock market. Shares of Power Finance Corporation (PFC) and REC Ltd. saw a sharp rise, with PFC jumping nearly 6% and REC advancing over 4% during a special trading session. This surge followed the finance minister's proposal to restructure the two NBFCs. The broader domestic equity benchmarks also traded higher, led by gains in automobile, pharmaceutical, and banking stocks, reflecting investor confidence in the government's growth-oriented reform agenda.

Conclusion

Union Budget 2026 lays down a clear and ambitious path for India's economy, focusing on structural reforms to enhance domestic manufacturing, modernize infrastructure, and build a resilient financial sector. The six-pillar strategy, combined with targeted investments and policy overhauls, aims to create a self-sustaining growth cycle. The successful implementation of these proposals will be crucial in positioning India to achieve its long-term vision of becoming a developed nation by 2047.