Union Budget 2026-27 Overview

The Union Budget for 2026-27 has been presented during times of significant global economic challenges. India's economy showed robust growth at 7.4%, but maintaining this growth is crucial.

Public Investment and Infrastructure

• Infrastructure spending is set to increase to ₹12.2 trillion in 2026-27, with an enhanced focus on large infrastructure projects.
• New initiatives include: 
  • High-speed rail links, especially in South India.
  • New dedicated freight corridors along the east-west axis.
  • Coastal cargo development to reduce pressure on railways and highways.
  • 20 new national waterways for mineral transport from the interior to ports.
• Increased capital expenditure through interest-free loans to states for investments.

Private Investment and Manufacturing Challenges

• Private investment in factories and projects has not matched public investment, with limited job growth.
• Successes include: 
  • The second iteration of the India Semiconductor Mission.
  • Increased outlay for the Electronics Components Manufacturing Scheme to ₹40,000 crore from ₹23,000 crore.
• Challenges faced by "Make in India" due to trade tensions.

Focus on Services Sector

• The Budget proposed a high-powered committee to examine employment and output in the services sector.
• Support provided to various service sectors: 
  • IT-enabled services.
  • Tourism.
  • Health and veterinary care.
  • Social care and creative sectors.
• Emphasis on skill development to bridge workforce skill gaps.

Fiscal Restraint and Debt Management

• Shifted focus from the fiscal deficit to the debt-to-GDP ratio as an operational instrument for debt targeting.
• Assumed nominal growth rate of 10% for the next year.
• Debt-to-GDP ratio projected to decline from 56.1% to 55.6% in 2026-27.
• Fiscal deficit aims to reduce from 4.4% to 4.3% of GDP.

Market and Investor Implications

• Increased gross market borrowing to ₹17.2 trillion from ₹14.6 trillion, potentially affecting bond markets.
• Focus on easing mechanisms and governance, including: 
  • Expansion of TReDS for smaller companies.
  • Decriminalization of several tax offenses.
  • Revised duty-free allowances for personal travel.
• Tighter securities transaction tax on futures and options to manage retail trader involvement.

Overall, the Budget aims to sustain growth through slower fiscal consolidation, state capital expenditure, and a shift to services.