Budget 2026 | Union Budget 2026-27 LIVE: FM Sitharaman Unveils Key Fiscal Road Map

Union Budget 2026-27: Live Updates and Key Announcements

Finance Minister Nirmala Sitharaman announced a 15% increase in capital expenditure for FY27 during her Union Budget 2026-27 speech to Parliament on February 1, 2026, targeting infrastructure development and job creation. This marks her ninth consecutive budget presentation, establishing a significant continuity in the government’s fiscal approach as India navigates global economic shifts.

As of the speech delivered at 11:30 AM IST, the Finance Minister confirmed the government's commitment to fiscal consolidation, projecting a fiscal deficit of 4.5% of GDP for FY27, down from the revised estimate of 5.1% for the current fiscal year (FY26). This target aligns with the long-term goal under the Fiscal Responsibility and Budget Management (FRBM) Act, signaling a disciplined approach to public finances.

Key budgetary documents tabled in Parliament confirm a substantial allocation of ₹12 lakh crore for capital expenditure in the upcoming fiscal year, a significant jump from the ₹10.4 lakh crore allocated in the previous budget. This increased outlay is aimed at bolstering critical infrastructure projects across roads, railways, ports, and digital networks, which economists suggest is crucial for sustaining India's medium-term growth trajectory and enhancing global competitiveness.

During the initial phase of her address, Minister Sitharaman also detailed a new 'PM GatiShakti Digital Infrastructure Fund' with an initial corpus of ₹50,000 crore, designed to accelerate the integration of multi-modal logistics and connectivity projects. While the fund's establishment has been confirmed, specific implementation timelines and the framework for private sector participation are currently awaiting further details from subsequent ministry notifications.

The Union Budget 2026-27 also introduced a revised income tax regime for individuals, increasing the tax rebate limit to ₹7.5 lakh from the previous ₹7 lakh for those opting for the new system. However, this adjustment does not apply to the older tax regime, maintaining existing slabs for taxpayers who choose to remain under it. Details regarding potential modifications to surcharges or cess in either regime are expected to be clarified in the Finance Bill 2026, which is yet to be fully parsed.

Taxation Measures and Revenue Projections

Confirmed tax policy changes include a rationalization of customs duties on certain raw materials for domestic manufacturing, particularly in sectors such as electronics, textiles, and green energy components. This measure, announced during the parliamentary address, is intended to boost local production and reduce import dependency, aligning with the 'Make in India' initiative. The specific Harmonized System (HS) codes impacted and the new duty rates are now publicly available in the detailed budget annexures.

The Finance Minister projected gross tax revenue for FY27 at ₹36.5 lakh crore, representing a 10.8% year-on-year growth, primarily driven by anticipated buoyancy in Goods and Services Tax (GST) collections and a steady increase in direct tax receipts. This projection underpins the government’s ambitious spending plans while striving for fiscal prudence. The underlying assumptions for economic growth and inflation influencing these revenue estimates are expected to be elaborated upon in the Economic Survey, typically released ahead of the budget, but its specific links to these projections remain to be explicitly stated.

Regarding corporate taxation, the existing concessional corporate tax rate of 15% for new manufacturing companies commencing production by March 31, 2024, has been extended by one year, now applying to units commencing production by March 31, 2025. This extension, a confirmed budget announcement, seeks to sustain investment momentum in the manufacturing sector amidst global supply chain recalibrations. Its effective date and final notification language are yet to be released by the Central Board of Direct Taxes (CBDT).

Sectoral Allocations and Strategic Focus

The budget prioritizes substantial allocations to critical sectors, including a ₹2.4 lakh crore allocation for the Railways, a continuation of the high investment trend from previous years. This funding aims to further modernize infrastructure, enhance safety systems, and expand Vande Bharat train production. Furthermore, a new 'Green Hydrogen Mission' received an initial allocation of ₹25,000 crore for FY27, intended to catalyze the production and adoption of green hydrogen, positioning India as a global hub for sustainable energy. The specific operational guidelines for accessing this fund by industry players are still awaited.

Agriculture and rural development continue to receive significant attention, with Minister Sitharaman announcing a ₹20 lakh crore target for agricultural credit, alongside an enhanced allocation for the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme. The specific quantum of enhancement for PM-KISAN beyond its current outlay has not yet been detailed in the initial budget documents, but an increase in farmer beneficiaries is anticipated through a broadened eligibility criteria, which remains to be notified.

The education sector will see the establishment of 100 new 'PM-SHRI' schools, aiming to deliver high-quality education through modern pedagogical methods and technology. These schools are intended to serve as exemplars for the National Education Policy 2020. Details regarding their geographical distribution and commencement of operations are awaited from the Ministry of Education.

Structural Differentiation and Economic Posture

This Union Budget structurally differentiates itself through a heightened and sustained focus on capital expenditure, clearly deprioritizing broad-based consumption subsidies in favor of long-term productive asset creation. Unlike previous budgets that often balanced immediate consumption stimulus with investment, the 2026-27 budget significantly leans into public investment as the primary engine for economic growth, even at the cost of immediate consumption boosts for certain segments. This strategic shift reflects a concerted effort to enhance India's supply-side capabilities and mitigate inflationary pressures through increased productivity rather than demand-side interventions.

The explicit omission of new large-scale social welfare schemes or significant increases in existing ones, beyond inflation-adjusted allocations, signals a fiscal posture prioritizing efficiency and targeted support over universal entitlements. This re-allocation of fiscal space towards infrastructure and green initiatives underscores the government's intent to build foundational economic strength, align with global climate goals, and attract private investment through improved logistics and energy security, rather than direct income transfers or expansive relief measures. This approach is editorially and economically relevant as it positions India for potential higher long-term growth but may entail short-term challenges for segments dependent on direct state support.

Market Reactions and Institutional Context

Initial market reactions following the capital expenditure announcement were largely positive, with the Nifty 50 index showing a modest gain of 0.8% and the Sensex up by 0.7% as of 12:15 PM IST on February 1. Public sector undertakings (PSUs) and infrastructure-related stocks saw notable upticks. The yield on the benchmark 10-year government bond, however, ticked up marginally by 3 basis points to 7.23%, reflecting some investor concern about the government’s borrowing program despite the disciplined fiscal deficit target. This movement indicates market sensitivity to the sheer volume of anticipated government borrowing required to fund the expanded capital outlay, even if the deficit as a percentage of GDP is controlled.

From an institutional perspective, the commitment to a 4.5% fiscal deficit by FY27 reinforces India's adherence to the FRBM framework, providing a degree of predictability for international rating agencies and investors. This fiscal consolidation path is critical for maintaining sovereign credit ratings and ensuring access to global capital markets at favorable rates. The Reserve Bank of India (RBI) is likely to watch these fiscal metrics closely, as they influence monetary policy decisions and inflation management. Any deviation from this stated path could introduce volatility in bond markets and impact borrowing costs for both the government and corporations.

People Also Ask

• What are the key tax changes in Union Budget 2026-27?
  The Union Budget 2026-27 increased the tax rebate limit to ₹7.5 lakh for individuals opting for the new tax regime. Customs duties on select raw materials for manufacturing were rationalized, aimed at boosting domestic production. No changes were announced for the older tax regime.

• How much capital expenditure has been allocated in Budget 2026-27?
  Finance Minister Nirmala Sitharaman announced a 15% increase in capital expenditure for FY27, amounting to ₹12 lakh crore. This substantial allocation is focused on accelerating infrastructure development across various critical sectors including roads, railways, and digital networks.

• What is the fiscal deficit target for FY27?
  The government has set a fiscal deficit target of 4.5% of GDP for FY27. This target signifies the government's commitment to fiscal prudence and consolidation, continuing its trajectory towards lowering the deficit in line with statutory requirements and economic stability goals.

• Which sectors will benefit most from Union Budget 2026-27?
  Key sectors expected to benefit significantly include infrastructure (roads, railways, ports), green energy (Green Hydrogen Mission), and manufacturing due to increased capital expenditure and rationalized customs duties. Agriculture and rural development also received enhanced allocations and credit targets.

• How does this budget compare to previous ones?
  The Union Budget 2026-27 is characterized by a strong and sustained emphasis on capital expenditure, deprioritizing broad-based consumption subsidies. This marks a structural shift towards long-term asset creation and supply-side improvements over immediate demand-side stimulus seen in some previous budgets.

• What is the 'PM GatiShakti Digital Infrastructure Fund'?
  The 'PM GatiShakti Digital Infrastructure Fund' is a new initiative with an initial corpus of ₹50,000 crore. It is designed to accelerate the integration and development of multi-modal logistics and connectivity projects across the country, enhancing overall infrastructure efficiency.