Budget 2026 | Union Budget 2026: Key Policy Shifts, Fiscal Targets, and Market Impact Today

Union Budget 2026: Live Updates on Economic Policy and Fiscal Directives

Finance Minister Nirmala Sitharaman on February 1, 2026, announced direct tax adjustments as part of the Union Budget presented in Parliament.

The comprehensive budget document, tabled in Parliament immediately following the Finance Minister's address, detailed the government's fiscal roadmap for the upcoming financial year. These documents serve as the primary source for all confirmed allocations, tax policies, and macroeconomic targets discussed during the speech.

Confirmed Budget Announcements

As of the speech delivered on February 1, 2026, Finance Minister Nirmala Sitharaman confirmed several key policy changes and financial allocations, directly impacting various sectors of the economy.

Tax Policy Changes

The Union Budget 2026 introduced revised direct tax slabs for individual taxpayers, aiming to provide relief to the middle-income group. For annual incomes between ₹7 lakh and ₹10 lakh, the tax rate has been reduced from 10% to 5%, while incomes between ₹10 lakh and ₹15 lakh will now be taxed at 15%, down from 20%. No changes were announced for corporate tax rates. Details regarding specific deductions and exemptions under the new regime are currently being scrutinized within the tabled budget documents.

Regarding indirect taxes, the government announced no changes to the Goods and Services Tax (GST) rates. However, customs duties on select raw materials for green energy manufacturing, including specific components for solar panels and electric vehicle batteries, have been reduced to promote domestic production and align with India’s climate targets. This reduction is effective immediately from February 1, 2026, as per the budget notification released subsequent to the speech.

Spending Allocations

A significant increase in capital expenditure (capex) was announced, with an allocation of ₹12.5 lakh crore for the financial year 2026-27, marking a 18% increase over the revised estimates for the current fiscal year. This allocation targets infrastructure development, including roads, railways, and urban public transport projects. This rise is aligned with the government’s stated intent to boost economic growth through multiplier effects of infrastructure spending.

The rural housing scheme, Pradhan Mantri Awas Yojana (Gramin), received an enhanced allocation of ₹95,000 crore, up from ₹75,000 crore in the previous year's budget. This funding aims to complete an additional 20 lakh houses in rural areas over the next fiscal year. The exact criteria for beneficiary selection under the enhanced scheme remain consistent with existing guidelines, according to initial ministry statements issued on the same day.

Fiscal Deficit Targets

Finance Minister Sitharaman announced a fiscal deficit target of 4.5% of GDP for the financial year 2026-27, a reduction from the revised estimate of 5.1% for FY2025-26. This target underscores the government's commitment to fiscal consolidation while balancing growth imperatives. The path to achieving this target relies on robust tax collections and disciplined expenditure management, according to the Fiscal Policy Statement presented with the budget.

Scheme Launches and Revisions

A new 'National Green Hydrogen Mission' scheme was launched with an initial outlay of ₹25,000 crore over the next five years. This mission aims to establish India as a global hub for green hydrogen production and export, offering incentives for manufacturing electrolysers and promoting green hydrogen consumption across industries. The detailed guidelines for incentive disbursement are expected to be notified by the Ministry of New and Renewable Energy within the next three months.

Structural Differences and Policy Shifts

The Union Budget 2026 exhibits notable structural differences from previous budgets, particularly in its composition and fiscal posture. This budget prioritizes capital expenditure growth while maintaining a clear trajectory for fiscal consolidation, diverging from periods of higher revenue expenditure focus during economic recovery phases. The government’s explicit commitment to reducing the fiscal deficit to 4.5% by FY27 signals a stronger emphasis on macroeconomic stability and debt sustainability than observed in immediate post-pandemic budgets.

Editorially, the budget explicitly deprioritizes large-scale, broad-based consumption subsidies, instead favoring targeted incentives for specific industries like green energy and rural housing. This reallocation reflects a strategic pivot towards supply-side interventions and long-term growth enablers. The omission of new significant welfare schemes beyond the enhancement of existing ones suggests a consolidation of social spending programs, focusing on efficient implementation rather than new program introductions. This approach is economically relevant as it aims to free up resources for productive capital formation and reduce the recurring burden on the exchequer.

Macroeconomic Context and Market Reactions

The budget's fiscal deficit target of 4.5% of GDP for FY27 aligns with the government's medium-term fiscal glide path, providing a predictable framework for bond markets. The yield on the benchmark 10-year Indian government bond, which was trading at 7.15% prior to the budget speech, reacted positively, briefly dipping to 7.08% immediately following the fiscal consolidation announcement, indicating reduced borrowing cost expectations. This institutional constraint on government borrowing is being actively managed through the announced deficit reduction.

The increased capital expenditure outlay to ₹12.5 lakh crore for FY27 represents a continuation of a historical trend observed since FY21, where public investment has been used as a primary lever for economic growth. This proactive fiscal policy stance contrasts with global economic trends marked by tighter monetary conditions and increased fiscal prudence in developed economies, positioning India's budget as growth-oriented amidst global headwinds. Analysts from leading financial institutions noted that this sustained capex push is crucial for India to achieve its aspirational growth targets in a challenging global trade context, which has seen moderated demand impacting export-oriented sectors.

Announced but Partially Detailed Measures

Several measures were announced with broad strokes, with full implementation details yet to be publicly released. The 'Pradhan Mantri Kaushal Vikas Yojana' (PMKVY) was mentioned for an upgrade to 'PMKVY 5.0,' focusing on industry-relevant skills for emerging sectors like AI and robotics. While the intent to train 50 lakh youth over the next three years was declared, specific modules, training partners, and the financial outlay for this upgraded phase were not explicitly detailed in the speech or initial budget documents. These details are awaited from the Ministry of Skill Development and Entrepreneurship.

An allocation for coastal zone management and mangrove conservation was announced under a new 'Blue Economy' initiative. The budget document earmarked ₹5,000 crore for this initiative over the next two years. However, the specific projects, geographical coverage, and implementation timelines for this initiative were not specified in the initial budget releases. Further clarification is expected from the Ministry of Environment, Forest and Climate Change in subsequent press briefings.

Awaited Clarifications and Implementation

While the Finance Minister provided a comprehensive overview, several key aspects of the budget's implementation and specifics are still awaiting official notification or detailed rules. For instance, the effective dates for certain adjustments in customs duties on specific components, though announced as immediate, require detailed secondary legislation for full clarity on all applicable Harmonized System (HS) codes. The final notification language for the revised direct tax slabs, particularly concerning the interplay with existing deductions for home loans and investments, has not yet been formally released by the Central Board of Direct Taxes (CBDT).

Furthermore, the precise mechanisms for monitoring the utilization of increased funds for rural infrastructure projects and the performance metrics for the new Green Hydrogen Mission are expected to be elaborated in subsequent policy guidelines. Market participants are also awaiting the full detailed breakdown of market borrowing calendars from the Reserve Bank of India and the Ministry of Finance, which will provide more granular insight into the government's bond issuance strategy for the fiscal year.

People Also Ask

What are the key direct tax changes in Union Budget 2026?

The Union Budget 2026 adjusted direct tax slabs for individuals, reducing rates for annual incomes between ₹7-10 lakh to 5% and ₹10-15 lakh to 15%. These changes aim to provide relief to middle-income taxpayers, effective for the upcoming financial year.

What is the fiscal deficit target announced for FY2026-27?

Finance Minister Nirmala Sitharaman announced a fiscal deficit target of 4.5% of GDP for the financial year 2026-27. This represents a reduction from the revised estimate of 5.1% for the current fiscal year, reinforcing fiscal consolidation efforts.

How much has been allocated for capital expenditure in Union Budget 2026?

The Union Budget 2026 allocates ₹12.5 lakh crore for capital expenditure in FY2026-27. This 18% increase over the previous year's revised estimates is intended to boost infrastructure development and stimulate economic growth.

Are there new schemes for green energy announced in the budget?

Yes, the budget launched the 'National Green Hydrogen Mission' with an initial outlay of ₹25,000 crore over five years. This initiative aims to promote domestic production and consumption of green hydrogen, positioning India as a global leader.

What impact does the budget have on rural housing?

The rural housing scheme, Pradhan Mantri Awas Yojana (Gramin), received an enhanced allocation of ₹95,000 crore in the Union Budget 2026. This increased funding is targeted towards completing an additional 20 lakh houses in rural areas.

When will the full details of all budget announcements be available?

While key announcements were made during the speech and in tabled documents on February 1, 2026, many specific implementation details, effective dates, and secondary legislation are still awaited. These will be released by relevant ministries in the coming weeks and months.