India’s Union Budget FY 2026–27: Key Highlights, Themes and Sectoral Priorities

Nirmala Sitharaman presented the Union Budget for FY 2026–27 in Parliament against a backdrop of global economic uncertainty, supply-chain realignments, geopolitical volatility, and evolving capital flows. The Budget reinforces India’s commitment to sustained growth, fiscal discipline, and long-term competitiveness, while placing citizens, youth, and enterprise at the centre of policy design.

Describing the Budget as one that seeks to “transform aspiration into achievement and potential into performance,” the Finance Minister framed it as a Yuva Shakti–driven Budget, focused on converting India’s demographic advantage into productive capacity through skilling, jobs, entrepreneurship, and manufacturing scale-up.

Macro Context and Policy Direction

The Budget reflects confidence in India’s growth trajectory built on:

• Structural reforms undertaken over the last decade

• Fiscal prudence and monetary stability

• A sustained thrust on public investment

• A strong emphasis on Atmanirbharta, reducing critical import dependencies while building domestic capacity

At the same time, it underscores that citizens must directly benefit from government action—through employment creation, agricultural productivity, higher household purchasing power, and universal access to essential services.

Budget 2026–27: Core Theme

Yuva Shakti–Driven Growth

The central theme of the Budget is leveraging India’s youth as a growth engine by aligning education, skills, enterprise creation, and employment opportunities with emerging economic sectors and technologies.

Three Kartavya (Duties) Guiding the Budget

1. Accelerating and Sustaining Growth
   Enhancing productivity, competitiveness, and economic resilience amid volatile global conditions.

2. Fulfilling Aspirations and Building Capacity
   Strengthening human capital, institutional capability, and future-ready skills.

3. Advancing Sabka Sath, Sabka Vikas
   Ensuring equitable access to opportunities across regions, communities, and sectors.

Investment-Led Development Strategy

The Budget adopts a clear investment-led growth model, with focus on:

• Scaling manufacturing in strategic and frontier sectors

• Strengthening MSMEs as supply-chain anchors

• Reinforcing services as drivers of growth, exports, and employment

• Using public capex to crowd in private investment

• Infrastructure-led regional development, especially in Tier II and Tier III cities

• Long-term energy security, climate technologies, and resource resilience

Strengthening India’s Investment Ecosystem

Key measures include:

• Sustained public capital expenditure

• Regulatory simplification and tax certainty

• Trust-based compliance and reduced litigation

• Improved FDI facilitation and portfolio investment flows

• Deeper integration with global markets

A notable institutional reform is the Investment Friendliness Index of States, to be launched in 2025, aimed at encouraging competitive cooperative federalism by benchmarking state-level policy frameworks, facilitation mechanisms, and investor responsiveness.

Biopharma: A Strategic Manufacturing Pillar

Biopharma SHAKTI

(Strategy for Healthcare Advancement through Knowledge, Technology & Innovation)

Biopharma is placed at the centre of India’s frontier manufacturing ambitions.

• Outlay: ₹10,000 crore over five years

• Objective: Develop India as a global biopharma manufacturing hub

• Focus on domestic production of biologics and biosimilars

• Establishment of three new NIPERs and upgradation of seven existing institutes

• Creation of a nationwide network of 1,000 accredited clinical trial sites

Talent and Regulatory Strengthening

• Alignment of academic research with industry and global standards

• Faster regulatory approvals to improve international acceptance of Indian biopharma products

Manufacturing: Scaling Strategic and Frontier Sectors

The Budget introduces targeted schemes and cluster-based approaches to attract long-term industrial investment:

• India Semiconductor Mission (ISM) 2.0
  Enhanced outlay of ₹40,000 crore to strengthen equipment, materials, design, and supply chains

• Electronics Components Manufacturing Scheme
  Outlay increased to ₹40,000 crore to deepen domestic value addition

• Rare Earth Corridors
  Dedicated corridors in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu

• Chemical Manufacturing
  Three plug-and-play Chemical Parks supported by states

• Construction & Infrastructure Equipment (CIE)
  Scheme to boost domestic manufacturing of high-value equipment

• Container Manufacturing Scheme
  ₹10,000 crore allocation over five years

• Rejuvenation of 200 Legacy Industrial Clusters
  Infrastructure and technology upgradation for competitiveness

Textiles: Employment-Intensive Growth Engine

The Budget adopts an integrated approach to modernise textiles while strengthening fibre self-reliance.

Integrated Textile Programme

Key components include:

• National Fibre Scheme

• Textile Expansion and Employment Scheme

• National Handloom and Handicraft Programme

• Tex-Eco Initiative for sustainable textiles

• Samarth 2.0 for modernised skilling

These measures aim to boost productivity, exports, and regional manufacturing clusters.

Infrastructure: Crowding in Private Investment

Infrastructure remains a cornerstone of growth strategy.

• Public capital expenditure: ₹12.2 lakh crore in FY27

• Seven High-Speed Rail corridors for inter-city connectivity

• 20 new National Waterways to improve logistics efficiency

• Continued focus on Tier II and Tier III cities

• City Economic Regions (CERs) with ₹5,000 crore per region over five years

This approach links infrastructure directly with manufacturing, services, and urban economic clusters.

Champion SMEs and Micro Enterprises

Recognising MSMEs as growth multipliers, the Budget focuses on:

• Creation of Champion SMEs

• Improved access to equity, liquidity, and risk capital

• Institutional support for compliance and operational efficiency

• Special focus on MSMEs in Tier II and Tier III cities

Education, Skills and Services-Led Growth

Services are positioned as a core growth engine with a target of 10% global share by 2047.

Key initiatives include:

• High-Powered Education to Employment and Enterprise Standing Committee

• Assessment of AI and emerging technologies on jobs

• Unified tax framework for IT, ITeS, KPO, and contract R&D services

• Expanded safe harbour provisions for tax certainty

AVGC and the Creative Economy

The Budget recognises the Orange Economy as a major employment generator.

• AVGC sector projected to need 2 million professionals by 2030

• AVGC Content Creator Labs in 15,000 schools and 500 colleges

• Anchored by the Indian Institute of Creative Technologies, Mumbai

Climate Technologies and Energy Transition

Carbon Capture, Utilisation and Storage (CCUS)

• Outlay of ₹20,000 crore over five years

• Focus on power, steel, cement, refineries, and chemicals

• Supports decarbonisation and long-term energy security

Healthcare and Medical Value Tourism

Healthcare Workforce and Allied Services

• Expansion of Allied Health Professional institutions

• Structured ecosystem for geriatric and allied care

• Nationally aligned training for caregivers

AYUSH and Traditional Medicine

• New All India Institutes of Ayurveda

• Upgradation of AYUSH pharmacies and testing labs

• Enhanced global outreach and research

Healthcare Infrastructure

• Expansion of trauma and mental health facilities

• Strengthening district-level healthcare systems

Medical Value Tourism Hubs

• Five Regional hubs in PPP mode

• Integrated healthcare, education, diagnostics, and facilitation centres

Tourism: Infrastructure, Skills and Digital Enablement

Tourism is positioned as a scalable economic activity.

Key measures include:

• National Institute of Hospitality (upgraded NCHMCT)

• Upskilling 10,000 tourist guides across 20 iconic sites

• National Destination Digital Knowledge Grid

• Development of 15 archaeological sites as experiential destinations

• Promotion of eco-tourism and niche tourism circuits

Tax Reforms: Certainty, Simplicity and Trust

The Budget advances a modern tax framework through:

• Simplified income tax rules and forms

• Tax holiday till 2047 for foreign cloud service providers using Indian data centres

• Reduced litigation and decriminalisation of minor offences

• Extended safe harbour rules for IT and services

• Incentives for manufacturing, exports, data centres, and bonded warehousing

• Simplified tax treatment for non-resident experts and foreign service providers

Customs Reforms

Customs measures focus on transparency and competitiveness:

• Simplified tariff structure

• Phased removal of outdated exemptions

• Effective rates embedded in tariff schedules

• Expanded duty-free imports for exports, electronics, energy transition

• Trust-based systems with automation and risk-based assessments

Conclusion

The Union Budget 2026–27 is a forward-looking, structurally anchored Budget that prioritises youth, manufacturing depth, services competitiveness, and infrastructure-led growth. Rather than headline tax shocks, it delivers predictability, capacity creation, and long-term investment confidence, positioning India to navigate global uncertainty while accelerating towards its development goals.