Budget Highlights: Major Policies Announced by FM Nirmala Sitharaman

If there was ever a Budget that tried to balance ambition with pragmatism, this year’s Union Budget 2026-27 presented by Finance Minister Nirmala Sitharaman stands out. Delivered on February 1, 2026, this Budget tries to thread multiple needles at once: stabilize public finances, boost growth, deliver reform continuity, and make India future-ready for disruptive change. In her ninth consecutive Budget speech, the FM reinforced the government’s vision of a “Viksit Bharat” (Developed India) by 2047 while acknowledging the challenges thrown up by global volatility and technological disruption.

This Budget is as much about transforming frameworks as it is about numbers. Beyond the usual fiscal arithmetic lies a clear push for manufacturing leadership, digital competitiveness, inclusive growth, infrastructure, and climate-aligned investment all while striving to keep everyday citizens’ wallets protected.

Let’s break down with this blog what this year’s economic blueprint means for India’s growth, taxpayers, businesses, and tomorrow’s workforce.

The Big Economic Picture From Budget 2026: Growth with Fiscal Discipline

The government projected high growth near 7% while maintaining fiscal caution. The fiscal deficit target stands at 4.3% of GDP, and the long-term plan aims to bring debt to GDP toward 50% by 2030. This is paired with sustained public investment rather than austerity.

Effective Capital Expenditure for FY27 is estimated at ₹17.1 lakh crore, while total revenue expenditure stands at ₹41.3 lakh crore. The approach is clear. Continue spending on growth-creating assets while tightening fiscal ratios gradually rather than abruptly.

Manufacturing and Strategic Industries: The Core Engine From Budget 2026

The Budget places manufacturing at the center of long-term competitiveness, especially high-value and technologically advanced sectors.

Key Manufacturing Initiatives

• India Semiconductor Mission 2.0.
• Biopharma SHAKTI.
• Electronics Components Manufacturing Scheme.
• Integrated Textile Programme.
• Three Dedicated Chemical Parks.
• Rare Earth Permanent Magnet Scheme.
• Container Manufacturing Scheme.
• Sports Goods Manufacturing Initiative.
• Revival of 200 Legacy Industrial Clusters.
• Hi-Tech Tool Rooms in CPSEs.

These initiatives aim to reduce import dependency, strengthen domestic value chains, and push India up the global manufacturing ladder rather than staying in low-margin assembly roles.

Budget 2026: Tax and Customs Reforms for Manufacturing

A large set of procedural and duty reforms target exporters and capital goods manufacturers.

• Five-year income tax exemption for certain non-resident suppliers of capital goods in bonded zones.
• Deferred duty payment windows for trusted manufacturers.
• Duty-free import expansion for seafood processing inputs from 1% to 3% of previous export turnover.
• Duty exemptions on aircraft manufacturing components and microwave oven parts.
• Extended export timelines from six months to one year for leather and textile exporters.
• Electronic cargo sealing for faster factory-to-port clearance.
• SEZ domestic sale concession as a one-time measure.

These changes aim to reduce friction in export manufacturing and improve global competitiveness.

MSMEs: Equity, Liquidity, and Compliance Support From Budget

Small and medium businesses receive one of the most structured support frameworks in recent budgets.

Equity Support

• ₹10,000 crore SME Growth Fund.
• ₹2,000 crore top-up to the Self-Reliant India Fund.

Liquidity Support

• Mandatory use of TReDS platforms for CPSE purchases from MSMEs.
• Credit guarantee support for invoice discounting.
• Asset-backed securities for MSME receivables to create secondary liquidity markets.
• Linking GeM with TReDS for faster financing.

Professional Support

• Introduction of Corporate Mitras in Tier 2 and Tier 3 towns to assist MSMEs with compliance at affordable costs.

This tri-layered model addresses the three biggest MSME pain points: capital access, delayed payments, and compliance burden.

Services Sector: Health, Tourism, IT, and Creative Economy

Health and Medical Tourism

• Five Medical Value Tourism hubs.
• Training of 1.5 lakh multiskilled caregivers.
• Upgrading allied health institutions.
• Expansion of AYUSH infrastructure including three new Ayurveda institutes.

IT and Data Centres

• Unified classification of IT services with 15.5% safe harbour margin.
• Safe harbour threshold increased from ₹300 crore to ₹2,000 crore.
• Tax holiday until 2047 for foreign companies providing cloud services through India-based data centres.
• Fast-tracked APA approvals.

Education and Creative Economy

• AVGC labs in 15,000 schools and 500 colleges.
• New National Institute of Design in eastern India.
• Girls’ STEM hostels in every district.
• National Institute of Hospitality.
• Digital knowledge grids for tourism and heritage.

The services push focuses equally on employment generation and global positioning.

Budget 2026 On Financial Sector and Capital Markets

The Budget introduces both incentives and higher transaction taxes.

• ₹100 crore incentive for large municipal bond issuances above ₹1,000 crore.
• Review of FEMA non-debt rules.
• Corporate bond market making frameworks.
• STT increases:
  • Futures from 0.02% to 0.05%
  • Options premium and exercise to 0.1% to 0.15%

While the incentives encourage deeper capital markets, higher STT may slightly increase trading costs for derivatives participants.

What’s On Agriculture, Fisheries, and Rural Tech From Budget 2026

• Duty-free fish catch from Indian vessels in exclusive economic zones.
• Coconut, cashew, and cocoa productivity programs.
• High-density orchard expansion for walnuts and almonds.
• Veterinary infrastructure subsidies.
• AI-integrated AgriStack portals.
• 500 reservoirs and Amrit Sarovars for fisheries value chain strengthening.

The emphasis is on productivity and technology rather than only subsidy expansion.

Budget On Infrastructure and Urban Development

Infrastructure remains a dominant allocation area.

Major Moves

• Infrastructure Risk Guarantee Fund.
• Dedicated Freight Corridors connecting East and West.
• 20 new National Waterways.
• Coastal cargo share target from 6% to 12% by 2047.
• ₹2 lakh crore support to states.
• East Coast Industrial Corridor development.

Urbanisation

• Seven High-Speed Rail Corridors.
• Focus on Tier 2 and Tier 3 cities and temple towns.
• City Economic Region model to improve agglomeration benefits.

Energy Security and Climate Measures From Budget 2026

• ₹20,000 crore Carbon Capture scheme.
• Duty exemptions on lithium-ion battery capital goods.
• Solar glass raw material duty relief.
• Nuclear project duty exemptions extended till 2035.
• Biogas excise exclusions.
• Critical mineral processing duty waivers.

These measures position clean energy and battery storage as strategic priorities.

Budget 2026 On Ease of Living and Taxpayer Relief

• TCS on overseas tour packages reduced to 2%.
• TCS on education and medical remittances reduced to 2%.
• Automated nil or lower TDS certificates for small taxpayers.
• Return revision window extended till March 31, 2026.
• Decriminalisation of certain compliance defaults.
• Cancer medicine customs duty exemptions.

The focus is procedural ease rather than sweeping slab changes.

Where the Money Comes From and Goes

Revenue Sources Listed in Budget 2026

Source: Ministry of Finance Budget Division

Major Spending Heads Listed in Budget 2026

Source: Ministry of Finance Budget Division

What It All Means for India’s Future

Taken together, Budget 2026 signals a shift from short-term stimulus thinking to long-term structural positioning. Instead of relying on one big reform lever, the government has spread its bets across manufacturing depth, infrastructure scale, technology adoption, and financial discipline. The intent is clear: build resilience into the economy so that growth is not only faster, but also more stable and less dependent on external cycles. For businesses and investors, this creates a policy environment that favours capital formation and domestic value creation over speculative momentum.

At the same time, several themes stand out as defining pillars of where India is headed:

• Manufacturing First: A sustained push to move up the global value chain and reduce import dependence.
• MSME Strengthening: Equity, liquidity, and compliance support aimed at unlocking small business potential.
• Infrastructure and Urbanisation: Large-scale public investment to improve productivity and connectivity.
• Digital and Green Transition: AI integration, data centres, clean energy, and battery ecosystems shaping the next growth wave.
• Fiscal Prudence: Continued spending on assets while keeping deficit and debt ratios on a measured glide path.

In the end, this Budget’s real impact will hinge not just on what has been announced, but on how quickly and consistently those policies are carried out. If execution stays on track and reforms are sustained, these initiatives have the potential to drive meaningful job growth, strengthen domestic industries, and expand participation across both the digital and green economy, turning policy intent into measurable economic progress.

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