Union Budget 2026 Highlights: Key Announcements for FY27

Finance Minister Nirmala Sitharaman presented the Union Budget for the financial year 2026-27 on February 1, 2026. This marked her ninth consecutive budget, setting the economic and fiscal roadmap for the nation. The budget aims to sustain India's growth momentum amidst global uncertainties, with a clear focus on infrastructure development, manufacturing, support for small businesses, and fiscal prudence. The framework is built upon the government's vision of a 'Viksit Bharat' by 2047, balancing ambitious growth targets with inclusive development.

A Look Back at Budget 2025

To understand the context of the new budget, it is useful to recall the key announcements from the previous year. The Union Budget 2025 introduced significant relief for middle-class taxpayers under the new tax regime, making income up to ₹12 lakh per annum tax-free. For salaried individuals, a standard deduction of ₹75,000 effectively raised this limit to ₹12.75 lakh. The 2025 budget also simplified TDS and TCS rules, cut customs duties on several items to boost manufacturing, and set a fiscal deficit target of 4.4% for FY26. These measures were designed to increase disposable income and spur domestic manufacturing.

Core Pillars of Budget 2026

The Finance Minister outlined three primary duties guiding the budget's proposals: accelerating and sustaining economic growth, fulfilling aspirations and building capacity, and ensuring inclusive development through 'Sabka Sath, Sabka Vikas'. These principles are reflected in the targeted allocations and policy initiatives across various sectors. The government aims to create a stable and predictable economic environment to attract investment and foster long-term expansion.

Continued Push for Infrastructure

A central theme of Budget 2026 is the sustained investment in infrastructure. The government increased its capital expenditure (capex) outlay by nearly 9% to ₹12.2 lakh crore for FY 2026-27. This substantial allocation is intended to drive economic activity, create employment, and improve logistics. A key announcement in this area is the proposal to develop seven new high-speed rail corridors. These corridors will connect major economic hubs like Mumbai-Pune, Pune-Hyderabad, Hyderabad-Bengaluru, Chennai-Bengaluru, Delhi-Varanasi, and Varanasi-Siliguri, aiming to provide a faster and more sustainable mode of passenger transport.

Strengthening National Defence

The budget allocated ₹7.85 lakh crore to the Ministry of Defence, an increase from the previous year's ₹6.81 lakh crore. Of this, ₹2.19 lakh crore is earmarked for capital outlay to modernize the armed forces. This includes significant funds for the acquisition of new aircraft, aero-engines, and naval fleet assets. The remaining ₹5.54 lakh crore will cover revenue expenditure, including salaries and pensions, which stand at ₹1.71 lakh crore.

Empowering MSMEs and Strategic Sectors

Recognizing the critical role of Micro, Small, and Medium Enterprises (MSMEs), the budget introduced a three-pronged strategy to support their growth. This includes a dedicated ₹10,000 crore fund to help promising MSMEs scale up and become 'Champions'. Additionally, the budget mandates that all central public sector enterprises make their purchases from MSMEs through the TReDS platform to ensure timely payments.

Strategic sectors also received a significant boost. The India Semiconductor Mission 2.0 was announced with an outlay of ₹40,000 crore to develop a comprehensive domestic ecosystem for semiconductor manufacturing. To secure critical resources, the budget proposed the development of rare earth corridors in mineral-rich states like Odisha, Kerala, Andhra Pradesh, and Tamil Nadu. Furthermore, a 'BioPharma Shakti' programme with a ₹10,000 crore outlay over five years was launched to position India as a global biopharmaceutical manufacturing hub.

Fiscal Roadmap and Tax Proposals

On the fiscal front, the government continued its path of consolidation, pegging the fiscal deficit for FY 2026-27 at 4.3% of GDP. The gross market borrowing is estimated at ₹11.7 lakh crore. In a move to provide stability and predictability, the Finance Minister announced no changes to the existing income tax slabs for individuals. However, a new Income Tax Act, 2025, is set to replace the six-decade-old law from April 1, 2026, aiming to simplify compliance, reduce litigation, and remove ambiguities. The budget also introduced a tax holiday until 2047 for foreign companies providing cloud services from data centres located in India, a measure designed to attract significant global investment in digital infrastructure.

Focus on Agriculture, Health, and Education

The budget introduced 'Bharat Vistar', a multilingual AI platform designed to integrate various agricultural portals and provide farmers with critical information and resources. To boost rural incomes, new schemes were announced for the veterinary, fisheries, and horticulture sectors. In healthcare, the budget proposed setting up five regional medical hubs with private sector participation to promote medical tourism and an investment of ₹10,000 crore to establish 1,000 clinical trial sites. The education sector will see the establishment of a National Institute of Design in eastern India, five university townships, and four new telescope facilities for astrophysics research.

Conclusion

The Union Budget 2026-27 presents a balanced approach, prioritizing long-term growth through strategic investments in infrastructure and manufacturing while maintaining a commitment to fiscal discipline. By supporting MSMEs, advancing strategic sectors like semiconductors and biopharma, and simplifying the tax framework, the government aims to strengthen the foundations of the Indian economy. The focus on stability, combined with targeted reforms, sets a clear direction for achieving the vision of a developed India.