Union Budget 2026 Highlights: Sitharaman's Reform Push for a 'Viksit Bharat'

Introduction to Union Budget 2026

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 structural reforms over rhetoric, positioning the budget as a crucial step towards achieving the vision of a 'Viksit Bharat' or developed India. The speech underscored a focus on long-term, sustainable growth, fiscal prudence, and inclusive development, targeting key sectors to bolster India's economic resilience amidst global uncertainties.

A Strategy of 'Reforms Over Rhetoric'

The core philosophy of the budget revolves around continuing the momentum of deep structural reforms. The Finance Minister highlighted that the government has consistently chosen decisive action to build domestic manufacturing capacity, ensure energy security, and reduce critical import dependencies. This approach, she stated, has delivered a high growth rate of around 7% and contributed to significant poverty reduction. The budget continues this trajectory, aiming to create a supportive ecosystem that fulfills the aspirations of all citizens, with a special focus on the poor, youth, farmers, and women.

Six Pillars of Economic Intervention

FM Sitharaman proposed a focused intervention plan across six critical areas to drive the next phase of growth. These pillars include scaling up manufacturing in strategic and frontier sectors, rejuvenating legacy industrial clusters, creating champion MSMEs, delivering a powerful push for infrastructure, ensuring long-term energy security, and developing city economic regions. This multi-pronged strategy is designed to create a synergistic effect, enhancing industrial productivity, creating jobs, and improving overall economic competitiveness.

Major Push for Manufacturing and Technology

The budget allocates significant resources to boost domestic manufacturing. The outlay for electronics manufacturing is set to increase to ₹40,000 crore in FY27. A similar push is evident in the semiconductor space, with the India Semiconductor Mission 2.0 also receiving an increased outlay of ₹40,000 crore to support industry-led research and training. To secure strategic resources, the government will support mineral-rich states like Odisha, Kerala, Andhra Pradesh, and Tamil Nadu in establishing 'rare earth corridors' to promote mining, processing, and manufacturing of these critical elements. Further, three dedicated chemical parks will be established to reduce import dependence, and new schemes will promote the domestic manufacturing of construction equipment and containers.

Infrastructure: The Engine of Growth

Public capital expenditure remains a key priority, with the allocation for FY27 increased to ₹12.2 lakh crore. This sustained investment aims to maintain growth momentum, particularly in Tier 2 and Tier 3 cities. A significant announcement was the development of seven high-speed rail corridors connecting key economic hubs, including Mumbai-Pune, Hyderabad-Bengaluru, and Delhi-Varanasi. These corridors are envisioned as 'growth connectors'. Additionally, a new east-west dedicated freight corridor will be established between Dankuni and Surat to improve logistics efficiency. The government also plans to operationalise 20 new waterways over the next five years.

Key Budget 2026 Allocations and Schemes

Financial Sector and Market Reforms

To align the banking sector with the country's growth ambitions, a high-level committee on 'Banking for Viksit Bharat' will be established. The budget also proposes the restructuring of Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to strengthen public sector financial institutions. 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 larger issuances. In a significant move to attract foreign investment, the government will review the Foreign Exchange Management (Non-Debt Instruments) Rules and increase the investment limit for individual NRIs in Indian equities from 5% to 10% under the Portfolio Investment Scheme.

Empowering MSMEs and Startups

The budget provides a three-pronged strategy to support Micro, Small, and Medium Enterprises (MSMEs). A ₹10,000 crore SME Growth Fund will be created to help promising enterprises scale up. To improve liquidity and ensure timely payments, the TReDS platform will be mandated for all purchases from MSMEs by Central Public Sector Enterprises (CPSEs). To ease the compliance burden, the government will facilitate the creation of a cadre of 'corporate mitras'—accredited paraprofessionals who can assist MSMEs at affordable costs.

Focus on Healthcare and Human Capital

The budget also addresses the healthcare sector with the announcement of the Biopharma Shakti programme, a ₹10,000 crore initiative aimed at developing India as a global biopharma manufacturing hub. The government plans to set up five medical tourism regional hubs in collaboration with the private sector and upgrade Ayush pharmacies and drug-testing labs. To support education and women's empowerment, a plan was announced to establish at least one girls' hostel in every district across the country.

Conclusion: A Roadmap for a Developed India

The Union Budget 2026 lays down a clear and ambitious roadmap focused on supply-side reforms, capital investment, and strengthening the domestic industrial base. By prioritizing manufacturing, infrastructure, and financial sector stability, the government aims to create a resilient and competitive economy. The success of these initiatives will depend on effective implementation and the ability to crowd-in private investment, steering India firmly on its path to becoming a developed nation by 2047.