India’s Union Budget FY 2026–27: Key Highlights, Announcements and Major Takeaways

India Union Budget FY26–27: Big Announcements, Policy Changes and Economic Focus

1. The Fiscal Foundation: Balancing Growth with Discipline

The Union Budget 2026–27 operates on a total expenditure of ₹53.5 lakh crore, representing a 7.7% increase over the previous year. A standout feature is the aggressive stance on capital expenditure (Capex), which has been scaled to a record ₹12.2 lakh crore for FY27.

This 11.5% jump from the revised estimates of FY26 is designed to "crowd-in" private investment at a time when global capital is seeking stable, high-growth destinations.

Despite this heavy investment, the government has maintained its roadmap for fiscal consolidation. The fiscal deficit for BE 2026–27 is pegged at 4.3% of GDP, down from 4.4% in the previous fiscal.

The long-term debt-to-GDP target remains firm at 50 ± 1% by 2030-31, with the current year's ratio estimated at 55.6%. This fiscal prudence is critical for maintaining India's sovereign credit ratings, which saw three upgrades in 2025, ensuring that the cost of borrowing for the private sector remains competitive.

Also Read : Top Strategic Sectors in India Open to 100% FDI: Complete Guide

2. The Three Kartavya: A Triple-Pillared Growth Strategy

The Budget is architected around three "Kartavya" (Duties) that serve as a moral and economic compass:

• Economic Productivity and Resilience: Enhancing India’s competitiveness through structural reforms and building a "buffer" against global volatility.

• Human Capital and Skill Fulfillment: Equipping the youth (Yuva Shakti) with the vocational and technological skills required for a 21st-century economy.

• Inclusive Prosperity (Sabka Sath, Sabka Vikas): Ensuring that the benefits of high GDP growth reach the "last mile," from the MSME owner in a Tier III town to the handloom weaver in a remote village.

3. Biopharma SHAKTI: Positioning India as a Global Hub

In a landmark move for the healthcare sector, the government launched Biopharma SHAKTI (Strategy for Healthcare Advancement through Knowledge, Technology & Innovation). With an outlay of ₹10,000 crore over five years, this scheme targets the high-value biologics and biosimilars market.

The strategy involves a massive institutional overhaul:

• Institutional Upgradation: The establishment of three new NIPERs (National Institute of Pharmaceutical Education and Research) and the modernization of seven existing ones.

• Clinical Research Dominance: To bridge the gap between lab and market, a network of 1,000 accredited clinical trial sites will be established across India. This aims to turn India into the world’s preferred destination for drug development and clinical validation, ensuring global acceptance of "Made in India" biopharma products.

4. Strategic Manufacturing: ISM 2.0 and Frontier Sectors

The Budget takes a "frontier-first" approach to manufacturing. The India Semiconductor Mission (ISM) 2.0 has been launched with an enhanced outlay of ₹40,000 crore. While ISM 1.0 focused on establishing the first fabs, 2.0 expands the focus to the entire ecosystem: equipment manufacturing, materials supply, and full-stack Indian Intellectual Property (IP).

Other key manufacturing highlights include:

• Electronics Component Manufacturing: Increased outlay to ₹40,000 crore to move from assembly to high-value component production.

• Rare Earth Corridors: Recognizing the weaponization of critical minerals, dedicated corridors will be set up in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu for integrated mining and processing of materials essential for green tech and defense.

• Container Manufacturing: A ₹10,000 crore scheme over five years seeks to reduce India's reliance on imported shipping containers, a move crucial for maritime logistics security.

5. Empowering Champion SMEs and MSMEs

MSMEs contribute nearly 30% to India's GDP, and the Budget 2026–27 introduces the SME Growth Fund with a ₹10,000 crore corpus. The goal is to identify and scale "Champion SMEs" that have the potential to integrate into global supply chains.

• Corporate Mitras: A new cadre of 10,000 "Corporate Mitras" will be trained in Tier II and III cities to provide compliance support and professional guidance, reducing the regulatory burden on small business owners.

• Self-Reliant India (SRI) Fund: A ₹2,000 crore top-up ensures that micro-enterprises continue to have access to risk capital.

6. Infrastructure: High-Speed Rail and City Economic Regions

Infrastructure remains the engine of the Indian economy. Beyond the record Capex, the Budget introduces City Economic Regions (CERs). With an allocation of ₹5,000 crore per region, the government will transform selected urban centers into economic clusters through a challenge-based, reform-linked financing model.

To connect these growth engines, seven High-Speed Rail (HSR) corridors have been proposed:

1. Mumbai–Pune

2. Pune–Hyderabad

3. Hyderabad–Bengaluru

4. Hyderabad–Chennai

5. Chennai–Bengaluru

6. Delhi–Varanasi

7. Varanasi–Siliguri

Additionally, the operationalization of 20 new National Waterways aims to double the share of inland water transport, significantly lowering logistics costs for mineral-rich and industrial states.

7. Digital Economy and the 2047 Tax Holiday

India is pivoting from a digital-first to an AI-first economy. To attract hyperscalers and cloud giants, the Budget offers an unprecedented tax holiday until 2047 for data center operations and cloud services provided to Indian customers via Indian resellers.

• Investment Certainty: This measure provides 20-year predictability for global investors.

• Safe Harbour: A safe harbour of 15% on cost has been established for related-party transactions in the data center space, minimizing transfer pricing disputes.

8. Education, Skills, and the Orange Economy

The Orange Economy (Creative Economy) is recognized as a major employment driver. The Budget aims to prepare 2 million professionals for the AVGC (Animation, Visual Effects, Gaming, and Comics) sector by 2030.

• AVGC Labs: Content Creator Labs will be established in 15,000 secondary schools and 500 colleges, supported by the Indian Institute of Creative Technologies, Mumbai.

• Education to Employment Committee: A high-powered standing committee will ensure that academic curricula are in constant sync with industrial requirements.

9. Climate Technologies: Carbon Capture and Energy Transition

In line with India’s "Net Zero 2070" goal, the Budget allocates ₹20,000 crore for Carbon Capture Utilisation and Storage (CCUS) technologies.

• Sector Focus: Power, steel, cement, refineries, and chemicals.

• Exemptions: Basic customs duties on capital goods for Lithium-ion cell manufacturing and nuclear power equipment have been extended, reinforcing India's commitment to clean energy sovereignty.

10. Healthcare: Medical Value Tourism and AYUSH

India aims to be the "Wellness Capital of the World." The Budget proposes five Regional Medical Value Tourism Hubs, which will be integrated complexes offering advanced surgery, diagnostics, and post-treatment care in partnership with the private sector.

• Care Economy: A structured ecosystem for geriatric and allied care services is being built, supported by 1.5 lakh multiskilled caregivers.

• AYUSH: Three new All India Institutes of Ayurveda and the upgradation of AYUSH drug testing labs will bring traditional medicine under rigorous global standards.

11. Modernizing Taxation: The Income Tax Act 2025

Perhaps the most significant administrative reform is the rollout of the Income Tax Act 2025, effective April 1, 2026. This act replaces the 65-year-old code with a simplified framework aimed at reducing litigation.

• Trust-Based Compliance: The introduction of a single combined order for assessment and penalty proceedings will eliminate multiple legal headaches for taxpayers.

• LRS Rationalization: TCS on overseas education and medical remittances has been reduced to a flat 2%, providing relief to the middle class.

• Customs Reforms: The customs tariff structure is being simplified to correct duty inversion (where raw materials are taxed higher than finished goods), directly supporting the "Make in India" initiative.

Conclusion

The Union Budget FY 2026–27 is a masterclass in strategic economic mapping. By doubling down on infrastructure, frontier manufacturing, and digital supremacy while simultaneously nurturing the "small" through MSME funds and skilling labs, the government has created a balanced growth equation.

The shift toward a simplified tax regime and the emphasis on regulatory certainty suggest that India is now playing a "long game," aiming not just for temporary recovery, but for permanent global leadership.

As the Finance Minister noted, this Budget is the bridge from aspiration to performance, positioning India as the stable, innovative, and resilient anchor of the global economy in 2026 and beyond.