Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27 on February 1, 2026 — her ninth consecutive budget presentation and the ninth budget of the Narendra Modi government — with a total expenditure outlay of Rs 50.65 lakh crore, the largest budget in India's history. The budget's headline theme was "Viksit Bharat ki Raftaar" (Speed of Developed India), reflecting the government's focus on accelerating infrastructure build-out, supporting manufacturing competitiveness, providing relief to the middle class through income tax changes and stimulating rural consumption ahead of the upcoming state elections cycle. The fiscal deficit was set at 4.4% of GDP for FY27 — a modest consolidation from the 4.8% FY26 estimate — while maintaining robust capital expenditure of Rs 11.21 lakh crore, a 10.8% increase over FY26 revised estimates.
The capital expenditure outlay of Rs 11.21 lakh crore — representing 3.1% of GDP — was the most significant positive in the budget for India's growth outlook, continuing the government's multi-year strategy of public investment crowding in private investment and maintaining the infrastructure build-out momentum that has been a key competitive advantage for India over other emerging markets. Road construction received Rs 2.78 lakh crore, railways Rs 2.52 lakh crore (including Rs 1.08 lakh crore for Vande Bharat and Amrit Bharat train production), defence capital expenditure Rs 1.72 lakh crore and urban development including metro projects Rs 95,000 crore. The Jal Jeevan Mission was extended with Rs 67,000 crore to complete piped water connections to remaining rural households by December 2027.
Income tax relief for the middle class was the other major headline of Budget 2026, with the Finance Minister raising the zero-tax threshold under the new tax regime from Rs 7 lakh to Rs 12 lakh for salaried individuals — a change that effectively eliminates income tax liability for approximately 3.2 crore additional taxpayers and reduces the tax burden for everyone earning up to Rs 25 lakh. The revised new regime slabs — 5% for Rs 4-8 lakh, 10% for Rs 8-12 lakh, 15% for Rs 12-16 lakh, 20% for Rs 16-20 lakh and 30% above Rs 20 lakh — combined with the Rs 75,000 standard deduction represent a meaningful improvement in post-tax income for the middle class that economists expect to boost consumer demand for discretionary goods and services through FY27.
The agricultural sector received significant attention in Budget 2026, with the PM Kisan Samman Nidhi cash transfer amount increased from Rs 6,000 to Rs 8,000 per year for 11 crore small farmers, a Rs 30,000 crore allocation for natural farming transition support, and a new PM Agricultural Input Subsidy Scheme providing 50% subsidy on certified seeds, organic fertilisers and micro-irrigation equipment for farmers switching from chemical to natural farming methods. The budget also announced a Rs 15,000 crore Rural Food Processing Mission to establish 10,000 food processing units in MSME clusters near major agricultural producing districts, targeting a doubling of India's food processing industry to Rs 8 lakh crore by 2030 and significantly increasing the value addition captured domestically from India's agricultural output.
MSMEs and manufacturing received substantial policy support in Budget 2026, with the PLI scheme expanded to 6 new sectors including furniture, leather goods, glass and ceramic products, marine products, construction materials and sports goods — all labour-intensive industries where India has competitive potential but has been losing market share to Vietnam, Bangladesh and Indonesia due to infrastructure gaps and regulatory friction. The budget also announced a Rs 2 lakh crore MSME Credit Guarantee Enhancement Scheme that will double the guarantee coverage for MSME loans from government-backed credit guarantee institutions, addressing the collateral shortage that prevents millions of viable small businesses from accessing formal bank credit at reasonable rates. The Udyam portal was mandated as the single registration point for all MSME benefits, and the government announced plans to integrate it with GST, income tax and Jan Dhan systems to create a comprehensive MSME digital profile that enables automated credit assessment and subsidy delivery without manual application processes.
