UNION BUDGET 2026-27: PAVING THE WAY FOR INDIA’S GROWTH THROUGH FISCAL STRATEGY

INTRODUCTION
The Union Budget 2026–27 reflects a continued vision of Viksit Bharat. The Budget prioritises structural reforms, domestic capacity building and maintain Fiscal discipline to survive the challenges of global environment. The Budget adopts a medium- to long-term approach as it aims at economic growth and sustained performance rather than short term takeaways.
FISCAL STRATEGY
The Budget is built around four core pillars; namely inflation, continued economic growth and monetary stability. India’s growth momentum can be seen in the healthy domestic demand and high capital expenditure.
SUSTAINING ECONOMIC GROWTH BY PROMOTING AND MANUFACTURING MSMES
Manufacturing remains a priority in the Budget and preference has been given to certain strategic sectors including electronics components, biopharma, textiles, chemicals, semiconductors, container manufacturing, rare earth permanent magnets and capital goods. Dedicated initiatives for sports goods manufacturing and hi-tech tool rooms further reinforce the ecosystem for technologically advanced production.

TAX AND CUSTOMS REFORMS FOR INDUSTRY
To enhance competitiveness and reduce transaction costs, the Budget imposes multiple tax and customs rationalisation measures. These include income tax exemptions, deferred duty payment windows for trusted manufacturers, expansion of duty-free imports for export-oriented sectors and exemptions on critical inputs for electronics, footwear, aerospace, and defence-related manufacturing.
Procedural simplifications such as recognition of trusted importers, electronic sealing of export cargo and concessional domestic sales for eligible SEZ units mark a shift towards a facilitative and risk-based regulatory framework.

MSME Growth and Liquidity Support
Micro, Small and Medium Enterprises receive focused attention through a three-pronged support strategy. The dedicated SME Growth Fund of ₹10,000 crores aims to enhance equity access.
Changes in TReDS and GeM can help in the development of secondary markets for MSME receivables which will improve liquidity. Professional support mechanisms, particularly in Tier II and Tier III cities, aim to ease compliance burdens for MSMEs.

EMPHASIS ON THE SERVICES SECTOR
Recognising the services sector as a key driver of employment, the Budget introduces several changes such as institutional, fiscal and tax reforms for sectors such as healthcare, education, tourism, design, sports and digital services. Medical value tourism is promoted through the creation of dedicated hubs working in partnership with states and private entities. Allied health, education and multi-skilled caregivers find mention in the Budget and will be given special incentives. AYUSH that has found its foothold in India because of the present government receives enhanced support and upgradation through government support.
Tax rates see improvement for IT and digital services through higher thresholds, automated approval processes, and long-term incentives for data centres and cloud service providers operating from India.

AGRICULTURE, ALLIED SECTORS AND RURAL INCOME ENHANCEMENT
The Budget adopts a productivity-led approach to improving farmers’ incomes, with focused interventions in fisheries, animal husbandry, horticulture, sandalwood, cashew, cocoa and coconut cultivation.
Integrated development of reservoirs and Amrit Sarovars, strengthening of fisheries value chains, AI-enabled AgriStack integration and market linkages for farmer producer organisations aim to modernise agricultural practice. Special incentives are being given to women-led initiatives.

INFRASTRUCTURE DEVELOPMENT AND ENERGY SECURITY
Public capital expenditure continues to be the backbone of economic growth. Major initiatives include new Dedicated Freight Corridors, expansion of national waterways, development of ship repair ecosystems, coastal cargo promotion, and substantial financial support to states under infrastructure schemes.
Urbanisation will improve by the development of City Economic Regions and high-speed rail corridors connecting major economic centres. Tier II and Tier III cities and temple towns are now seen as new growth engines for helping in regional development with national infrastructure goals.
Energy sector is promoted through battery storage, solar manufacturing, nuclear power projects, critical mineral processing, carbon capture technologies and biogas blending for sustainable industrial policy.

PEOPLE-CENTRIC DEVELOPMENT AND SOCIAL INFRASTRUCTURE
Human capital development is a key area under the Budget. The care economy is strengthened through large-scale training of caregivers, expansion of geriatric and mental health infrastructure and establishment of emergency and trauma care centres at district hospitals.
Education and tourism are integrated into the growth strategy through different measures and there are policies that are made to improve the entrepreneurship of women in general.

EXPENDITURE PRIORITIES: SECTOR-WISE ALLOCATION
Expenditure of Major Items (₹ in crore):
Transport – ₹5,98,520
Defence – ₹5,94,585
Rural Development – ₹2,73,108
Home Affairs – ₹2,55,234
Agriculture and Allied Activities – ₹1,62,671
Education – ₹1,39,289
Energy – ₹1,09,029
Health – ₹1,04,599
Urban Development – ₹85,522
IT and Telecom – ₹74,560
Commerce and Industry – ₹70,296
Social Welfare – ₹62,362
Scientific Departments – ₹55,756
Tax Administration – ₹45,500
External Affairs – ₹22,119
Finance – ₹20,649
Development of North East – ₹6,812
This expenditure pattern demonstrates the Government’s focus on balancing growth-oriented spending with social welfare, security, and innovation, while ensuring regional equity.

TRUST-BASED GOVERNANCE AND EASE OF LIVING
The Budget deepens trust-based governance through customs and tax administration reforms, including extended validity of advance rulings, enhanced AEO benefits, simplified warehousing systems, reduced TCS rates under LRS, extended timelines for return filings, automated lower TDS certificates and decriminalisation of procedural defaults.
A one-time foreign asset disclosure window and expanded immunity frameworks are expected to reduce litigation and encourage voluntary compliance, particularly among small and medium taxpayers.
CONCLUSION
Union Budget 2026–27 presents a forward-looking roadmap for India’s economic transformation. By combining fiscal discipline with structural reforms, strengthening manufacturing and services, investing in infrastructure and human capital and simplifying governance frameworks, the Budget seeks to lay the foundation for an all-inclusive growth. The emphasis on long-term capacity building, institutional trust and regional balance signals a clear policy intent; moving India steadily towards a developed economy.

SUSHILA RAM VARMA
Advocate & Chief Legal Consultant
The Indian Lawyer & Allied Services