Indian Union Budget 2026: Highlights and insights

The Indian economy is characterised by strong, sustained growth, moderate inflation and improved macroeconomic stability, yet it stands at a global crossroads amidst trade wars and tariffs. The Indian finance minister, Nirmala Sitharaman, designed the budget as a short-term measure amidst volatility and outlined a long-term road map for India’s economic future.
The budget highlights were: first, to accelerate growth and make the economy more resilient to global shocks; second, to support and sustain every Indian citizen in fulfilling their potential through education, innovation and job creation; third, to ensure every individual, family, community, region and sector has access to inclusive growth, resources, amenities and opportunities for meaningful participation.
The finance minister increased the capital expenditure to ₹12.2 lakh crores. This reflects a 9 per cent increase from last year. Capital expenditure is the investment in long-term assets, such as railways, airports, roads, bridges and hospitals, to create jobs and drive economic growth. India Semiconductor Mission 2.0 was introduced to expand the semiconductor sector's capabilities to produce equipment and materials and strengthen supply chains.
The budget also signaled a push towards electronics manufacturing, a significant step forward both economically and geopolitically. Today, the semiconductor market is dominated by China, which holds a strong position, while the USA and Taiwan dominate chip design. India aims to be self-reliant in both manufacturing and design to reduce dependence, upskill workers and secure safe supply chains A substantial investment has been proposed to develop rare-earth corridors. To build an alternative supply chain, the budget proposes establishing dedicated rare earth corridors in Orissa, Kerala, Andhra Pradesh and Tamil Nadu to promote mining, processing, manufacturing and research. These states are mineral-rich, so these corridors will protect and insulate India from global supply chain disruptions or geopolitical escalations, given that China controls a large share of global rare-earth supply.
To improve connectivity, seven high-speed corridors have been proposed: Mumbai-Pune, Pune-Hyderabad, Hyderabad-Bangalore, Hyderabad-Chennai, Chennai-Bangalore, Delhi-Varanasi and Varanasi-Chhattisgarh.
These ‘growth connectors’ will link urban economic centres with smaller towns and improved transport will be a trade driver. The budget places a special focus on SMEs; a ₹10,000-crore fund has been announced.
As the textile industry faces pressure from global tariffs and trade tensions, a five-part integrated scheme has been introduced to bolster the labour-intensive sector. To promote India's biopharmaceutical sector, the budget proposes a ₹10,000-crore, five-year outlay to support vaccines, gene therapy and cutting-edge cancer treatments.
In this budget, emphasis was laid on the orange economy, animation, visual effects and the comics sector. It is a growing sector with a potential requirement of 2 million professionals by 2030. To support growth, Animation Visual Effects Gaming and Comics (AVGC) labs have been approved for 15,000 secondary schools and 500 colleges.
The finance minister, Nirmala Sitharaman, repeatedly mentioned artificial intelligence during her budget speech, stating its prominence in the budget’s vision. Foreign cloud and data centre companies, as well as those operating through Indian sellers, will enjoy a tax holiday until 2047.
Funding has been announced for the India AI mission, the India quantum mission and Bharat Vistar, a multilingual platform. To enhance nuclear power capacity, customs duty exemptions for goods required by nuclear power plants were announced till 2035. The current nuclear power production capacity is 8.8 gigawatts. India aims to increase it to 100 gigawatts by 2047.
The budget proposes to gradually reduce the fiscal deficit to around 4 per cent of GDP while maintaining substantial outlays for major projects. The sustainability of this plan depends heavily on high growth and buoyant tax receipts.
The budget proposes long-term investments and offers limited direct relief for lower- and middle-income families struggling with food, jobs, or basic expenses. For better employment outcomes, stronger support is needed for labour-intensive sectors.
The Budget outlines a long-term growth story through high public investment, strategic industrial policy, climate-tech spending and progress towards a simpler tax regime. However, less attention is paid to the immediate concerns about demand, employment and inequality in an uneven economy.