Union Budget 2026: Sitharaman's 9th Budget Focuses on Growth

Introduction to Union Budget 2026

Finance Minister Nirmala Sitharaman is set to present the Union Budget for the financial year 2026-27 in the Lok Sabha today, February 1, 2026. This presentation marks a significant milestone, as it is her ninth consecutive budget, a record in India's parliamentary history. The event is also notable for being held on a Sunday, a rare occurrence that underscores the government's procedural schedule. The budget is anticipated to lay out the fiscal roadmap for the upcoming year, balancing growth imperatives with fiscal discipline against a backdrop of global economic uncertainty.

Economic Context and Projections

The budget presentation follows the tabling of the Economic Survey 2025-26 in Parliament. The survey, often considered the government's annual economic report card, provides the analytical foundation for the budget's policy decisions. It projects that India's economy will grow by 7.4 percent in the financial year 2026 (FY26) and is expected to maintain a strong growth trajectory of 6.8 to 7.2 percent in FY27. This optimistic outlook is attributed to a combination of regulatory reforms, a stable macroeconomic foundation, and a renewed emphasis on private sector investment, setting a positive stage for the fiscal announcements.

Key Expectations Across Sectors

Expectations are high across various segments of the economy. Salaried individuals and taxpayers are closely watching for potential income tax relief, possibly through an increased standard deduction or adjustments to tax slabs under the new regime. The government's previous budgets have focused heavily on capital expenditure, and this trend is expected to continue. There is a keen focus on whether the Finance Minister will maintain aggressive spending on infrastructure to boost growth and job creation or adopt a more cautious approach to adhere to the fiscal consolidation path. Railway stocks are in the spotlight, with market participants anticipating a double-digit increase in the sector's budgetary allocation to fund safety upgrades, modernization, and capacity expansion. Additionally, there is a strong call from the tech industry for a significant push in artificial intelligence (AI) and digital public infrastructure to enhance India's global competitiveness.

Procedural Framework of the Budget Presentation

The Lok Sabha is scheduled to convene at 11 am, after which Finance Minister Sitharaman will present the statement of estimated receipts and expenditure for 2026-27. As part of the proceedings, she will also table two key documents mandated by the Fiscal Responsibility and Budget Management (FRBM) Act, 2003: the Medium-term Fiscal Policy-cum-Fiscal Policy Strategy Statement and the Macro-economic Framework Statement. Following her speech, the Finance Bill, 2026, which provides the legal framework for the tax proposals, will be introduced. In a special arrangement to accommodate the Sunday budget, both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) will hold special trading sessions with regular market hours.

A Shift in Budgetary Tradition

This year's budget is expected to break from a 75-year-old tradition. Reports suggest that Part B of the budget speech, which has historically been confined to tax and policy announcements, will be expanded to outline a detailed vision for India's economic future. This shift indicates a greater emphasis on long-term goals and strategic priorities, moving beyond the immediate fiscal year. The practice of presenting the budget on February 1 was started in 2017 to ensure that financial proposals are approved and implemented by the start of the new fiscal year on April 1, avoiding delays in government spending and policy execution.

Market Impact and Fiscal Deficit

The Union Budget's announcements have a direct and significant impact on financial markets. The fiscal deficit, which is the gap between government expenditure and revenue, is a critical metric watched by investors. A lower-than-expected deficit signals fiscal prudence and boosts investor confidence, which can strengthen the rupee and support the stock market. Conversely, a higher deficit may lead to increased government borrowing, potentially stoking inflation and interest rates, which can negatively affect corporate profitability. Tax proposals, particularly those related to capital gains, also influence foreign investment flows, thereby impacting the currency and market sentiment.

Analysis of Government's Priorities

The anticipated focus on AI, digital infrastructure, and continued capital expenditure signals the government's commitment to building a modern, competitive economy. The challenge for the Finance Minister lies in balancing these growth-oriented expenditures with the need for fiscal consolidation. The decision on whether to stick to the fiscal deficit glide path of 4.4 percent for 2025-26 or to prioritize spending will be a clear indicator of the government's economic strategy. Furthermore, with several state elections on the horizon, the budget may also contain political messaging and targeted schemes, reflecting a blend of economic policy and political considerations.

Conclusion

As Finance Minister Nirmala Sitharaman delivers her ninth consecutive budget, the nation will be watching for key announcements that will shape India's economic trajectory for the coming year. The speech is expected to address critical areas such as tax relief, infrastructure spending, and support for key sectors like technology and railways. The balance between stimulating growth and maintaining fiscal discipline will be the central theme. The detailed proposals in the Finance Bill and the long-term vision articulated in Part B of the speech will provide a comprehensive view of the government's plans to navigate domestic challenges and global uncertainties.