SDG 8: Decent Work and Economic Growth | SDG 9: Industry, Innovation and Infrastructure | SDG 10: Reduced Inequalities | SDG 17: Partnerships for the Goals
Ministry of Finance | Income Tax Department | NITI Aayog | Reserve Bank of India (RBI)
On February 1, 2026, Finance Minister Nirmala Sitharaman tabled the Union Budget 2026-27, the first prepared in Kartavya Bhawan. The budget is built upon three core “Kartavyas” (duties): accelerating economic growth, fulfilling aspirations through capacity building, and ensuring inclusive development under the vision of Sabka Sath, Sabka Vikas. With a total expenditure estimate of ₹53.5 lakh crore and non-debt receipts of ₹36.5 lakh crore, the budget aims for a fiscal deficit of 4.3% of GDP.
Interventions for Economic Resilience The budget proposes six strategic interventions to sustain growth and enhance productivity:
Strategic Manufacturing: Launch of Biopharma SHAKTI (₹10,000 crore) and ISM 2.0 for semiconductors, alongside the establishment of Dedicated Rare Earth Corridors.
Champion MSMEs: A dedicated ₹10,000 crore SME Growth Fund to incentivize enterprises and additional support for micro-enterprises through the Self-Reliant India Fund.
Infrastructure Push: Public capex increased to ₹12.2 lakh crore, including the development of seven High-Speed Rail corridors and the operationalization of 20 new National Waterways.
City Economic Regions: Allocation of ₹5,000 crore per CER to focus on Tier-II and Tier-III cities as specialized engines of growth.
Direct and Indirect Tax Overhaul Significant reforms aim to simplify the tax structure and reduce litigation:
Income Tax Act, 2025: Set to take effect on April 1, 2026, with a reduction from 819 sections to 536 sections and a unified “Tax Year” concept.
Corporate Tax: Minimum Alternate Tax (MAT) will become a final tax at a reduced rate of 14%, with credit set-off restricted to the new regime.
Customs Duty: Basic Customs Duty (BCD) exemptions extended for Lithium-Ion cell manufacturing, nuclear power projects (till 2035), and critical mineral processing.
Ease of Compliance: TCS on overseas tour packages and LRS for education/medical reduced to 2%, and interest awarded by the Motor Accident Claims Tribunal (MACT) exempted from tax.
What is the “SME Growth Fund” introduced in the Union Budget 2026-27? The SME Growth Fund is a dedicated ₹10,000 crore fund designed to transform small and medium enterprises into “Future Champions.” It provides financial incentives to enterprises based on select performance criteria, aiming to scale up domestic manufacturing and increase the competitiveness of Indian MSMEs in global supply chains.
Policy Relevance
The 2026-27 Budget institutionalizes a “Mission-Mode” approach to governance and development.
Fiscal Prudence and Growth: Estimating a fiscal deficit of 4.3% while maintaining a ₹12.2 lakh crore capex signals a commitment to growth without compromising long-term macroeconomic stability.
Deepening Technical Self-Reliance: By doubling the Electronics Components Manufacturing Scheme to ₹40,000 crore and launching ISM 2.0, the policy aims to move India from an assembly hub to a high-end component and IP owner.
Services as an Export Engine: The target of a 10% global share in services by 2047 and the formation of the EEE Standing Committee indicate a strategic pivot to leverage India’s youthful demographic as a primary driver of global value.
Urban Agglomeration Strategy: Mapping CERs and incentivizing Municipal Bonds (₹100 crore incentive for large issuances) aims to empower urban local bodies to fund their own modern infrastructure and amenities.
Relevant Question for Policy Stakeholders: How can the Ministry of Finance and the 16th Finance Commission ensure that the ₹1.4 lakh crore grants to states are effectively tied to the implementation of the CER and city-level deregulation reforms?
Follow the full news here: HIGHLIGHTS OF UNION BUDGET 2026-27