Kamal Ghorui
India’s 80th Union Budget for 2026-27 (UB27) is termed “Yuva Shakti-driven.” Its focus is all-encompassing but specifically targeted at the poor, underprivileged, and disadvantaged. Earlier, the Economic Survey 2025-26 observed that India’s economic trajectory was marked by stability, growth, and moderate inflation.
The government has been decisively pursuing far-reaching structural reforms. It chose action over ambivalence and reform over rhetoric. The government’s steps have delivered a high growth rate of around 7 percent. At the same time, nearly 25 crore people have moved out of multidimensional poverty.
While presenting the UB27 in Kartavya Bhawan, it outlined three Karta Vyas (duties) that form the basis of UB27.
- First, accelerate and sustain economic growth by enhancing competitiveness and building resilience to volatile global dynamics.
- Second, to fulfill the aspirations of people, build their capacity, and make them strong partners in India’s path to prosperity
- Third, ensure ‘sab ka saath, sab ka vikas,’ thereby ensuring that every family, community, and region has access to resources, amenities, and opportunities for meaningful participation.
To drive progress, UB27 focused on actions in six main areas: (i) growing manufacturing in key future-focused sectors, (ii) reviving older industries, (iii) building strong small and medium businesses (MSMEs), (iv) giving a major boost to roads, (v) railways, and other infrastructure, ensuring long-term safety and stability, and (vi) creating strong economic zones around cities.
1. Reform Express:
The UB27 maintained an equilibrium among sustained growth, fiscal consolidation, and inclusive development through reforms in manufacturing, strategic sectors, infrastructure financing, urban governance, financial markets, and regulatory predictability, under its long-term vision, “Reform Express”. Thus, the Reform Express is well articulated to maintain its momentum to help fulfill the three ‘kartavya’ outlined in the budget while pursuing the six areas of growth.
The larger vision of UB 27 is a set of building blocks that advance the vision of Viksit Bharat 2047 through higher productivity, competitiveness, resilience, fulfillment of aspirations, and inclusive development (“Sabka saath, sabka vikas”). It positions infrastructure, manufacturing, MSMEs, exports, and strategic sectors (semiconductors, bio-pharma, rare earths, textiles) as core engines.
It further emphasizes high-quality capex, the implementation of reforms to optimize resource value, and the ease of doing business through “Reform Express”. It aims to harness the full potential of human capital, women’s entrepreneurship, and social welfare, all supported by prudent finances.
2. Proven fiscal prudence:
Sustained post-pandemic prudence balances capex-led growth, demand support, and inclusive welfare amid global uncertainty. Fiscal deficit targeted at 4.3% of GDP for FY27 (down from 4.4% in FY26RE), adhering to the multi-year glide path. Debt-GDP continues as the primary operational anchor (shifted to this focus last year), providing greater medium-term flexibility than deficit targeting alone.
Under a broader frame of fiscal prudence, the medium-term policy stance prioritises a sustained downward trajectory of the debt-to-GDP ratio, currently at 55.6%, to reach 50±1% by FY31, thereby ensuring long-term macroeconomic stability, a lower interest burden, improved credit rating potential, and enhanced investor confidence.
This reinforcement allows calibrated room for priority investments without compromising sustainability. In addition to measuring the fiscal deficit, debt-to-GDP is used as another parameter to test fiscal prudence.
3. Allocational efficiency:
While working on allocations and resource augmentation, the nominal FY27 GDP is expected to reach Rs 393 lakh crore (10% growth over FY26AE). Non-debt receipts are Rs 36.5 lakh crore; net tax receipts are Rs 28.7 lakh crore. Total expenditure is Rs 53.5 lakh crore. It allocates Rs. 12.2 lakh crore for capital expenditure (up from Rs. 11.2 lakh crore), with total outlay at Rs. 53.5 lakh crore, net tax receipts at Rs. 28.7 lakh crore, and a fiscal deficit of 4.3% of GDP.
While raising the Capex to 12% to reach Rs 12.2 lakh crore, the fiscal deficit is set to contain gross borrowings within Rs 17.2 lakh crore; net borrowings are Rs 11.7 lakh crore (70% of the deficit). The fiscal equation of the UB27 looks credible, achievable, and market-aligned.
Infrastructure, manufacturing, MSMEs, exports, and strategic sectors as key drivers. MSME growth fund (Rs 10,000 crore), To top up the Self Reliance India Fund with Rs 4,000 cr in FY27 to support MSMEs.
The cluster revivals, GeM-TReDS integration; targeted support for India Semiconductor Mission (ISM 2.0), bio-pharma, rare earths, textiles, containers, and high-value agriculture to boost self-reliance, jobs, and exports.
The government will continue to develop infrastructure in Tier 2 and Tier 3 cities. The centre will support 5 university townships near major industrial logistics centres. To develop 7 high-speed corridors between cities with transport connectivity as growth connectors. Govt to launch pilot scheme to upgrade skills of 10,000 guides at 20 iconic tourist sites.
To support women entrepreneurship, the finance minister proposed setting up of Self-Help Entrepreneur (SHE) Marts. Khelo India mission to transform the sports sector over the next decade Capex on roads, railways (7 high-speed corridors), urban/tier-2-3 cities (Rs5,000 crore/year over five years), green initiatives (Rs 20,000 crore carbon capture over the next five years), and people-centric steps (skilling and tourism).
High-value agriculture sees Bharat-VISTAAR (AI-integrated AgriStack), programs for cashew/cocoa/coconut, walnut horticulture, 500 reservoirs, and fisheries/animal husbandry boosts like credit subsidies and FPOs. Moreover, it empowers Divyangjan via skill schemes and assistive devices; builds care ecosystem with 1.5 lakh caregivers trained, NIMHANS-2, and trauma centers; promotes medical tourism hubs, AYUSH institutes, sports under Khelo India, and AVGC labs in schools.
Introduces simplified Income Tax Act 2025 (effective April 2026); No change in tax slabs and income of individuals up to Rs. 12 lakhs remains tax-free with all earlier deductions. It eases TCS on LRS/education (to 2%), TDS on manpower (1-2%), and penalties; exemptions for non-residents, cooperatives, and IT services safe harbours up to ?2,000 crore turnover. Customs duties cut for energy transition (CCUS ?20,000 crore), critical minerals, nuclear, and aviation.
4. Financial sector reforms:
As part of the restructuring & Strengthening of public sector financial institutions, it is proposed to offer incentives of Rs 100 crore for single-bond issuances by municipal corporations exceeding Rs 1,000 crore. It announced the restructuring of REC Ltd (formerly Rural Electrification Corporation) and Power Finance Corporation (PFC).
The Portfolio Investment Scheme enables non-resident Indians and foreign investors to trade Indian equities via a designated bank account approved by the RBI. The scheme imposes investment caps—typically 5% for an individual investor and 10% in total per company—while ensuring that all transactions comply with regulatory norms. Investments made under this route can be repatriated. While highlighting robust financial sector performance, with improved asset quality, credit growth, and reforms to align banking/NBFCs with Viksit Bharat goals. With strong balance sheets, record profitability, and 98% village coverage, banks and NBFCs will play a greater role in realizing its long-term aspirations to become a developed economy.
Hence, it is proposed that a high-level committee review reforms to commercial/co-operative banks to ensure stability and inclusion. The UB27 has been well transformed into an effective tool not only to support sustained improvement in the near term but also to maintain its umbilical connection to the roadmap to achieve the long-term vision of Viksit Bharat – 2047.
END OF ARTICLE
