India’s Finance Minister Nirmala Sitharaman presented the Union Budget 2026-27 on Sunday, 1 February 2026, targeting a fiscal deficit of 4.3 per cent of GDP while boosting infrastructure spending to ₹12.2 lakh crore.
New Delhi: Finance Minister Nirmala Sitharaman tabled the India Budget 2026 in Parliament on 1 February 2026, projecting a fiscal deficit of 4.3 per cent of GDP for FY 2026-27. The move continues fiscal consolidation from 4.4 per cent in the revised estimates for 2025-26, alongside a major push in capital expenditure to support growth amid global challenges.
This India Budget 2026 matters for South Asia, where India’s fiscal discipline and infrastructure investments can stabilise regional markets, encourage cross-border trade, and set examples for deficit management in economies like Pakistan and Bangladesh facing similar pressures.
Union Budget 2026 Highlights
The Union Budget 2026 highlights centre on structural reforms and targeted spending. Public capital expenditure rises to ₹12.2 lakh crore in FY 2026-27 from ₹11.2 lakh crore previously, an increase of about 8.9 per cent. This supports manufacturing scale-up in seven priority sectors: pharmaceuticals, semiconductors, rare earth magnets, chemicals, capital goods, textiles, and sports goods.
The budget revives 200 legacy industrial clusters and introduces an Infrastructure Risk Guarantee Fund for partial credit guarantees to lenders. Reforms include a new Income Tax Act from April 2026 to simplify rules, exemptions on customs duties for critical minerals and lithium-ion cells, and initiatives like Carbon Capture Utilization and Storage with ₹20,000 crore allocation.
Prime Minister Narendra Modi stated the nation moves “away from long-term problems to tread the path of long-term solutions.” Sitharaman emphasised balancing ambition with inclusion for Viksit Bharat.
Other measures feature Biopharma SHAKTI with ₹10,000 crore, an SME Growth Fund of ₹10,000 crore, and operationalising 20 new National Waterways starting with NW-5 in Odisha.
India Fiscal Deficit 2026 Outlook
The India fiscal deficit 2026 target of 4.3 per cent of GDP for FY 2026-27 reflects continued prudence. Debt-to-GDP ratio falls to 55.6 per cent in BE 2026-27 from 56.1 per cent in RE 2025-26. The government aims for 50 ± 1 per cent by 2030-31.
Gross market borrowings reach ₹17.2 lakh crore, with net borrowings at ₹11.7 lakh crore. Non-debt receipts stand at ₹36.5 lakh crore approximately, total expenditure at ₹53.5 lakh crore, and Centre’s net tax receipts at ₹28.7 lakh crore.
This India fiscal deficit 2026 path includes banking sector reforms via a High Level Committee and restructuring of Power Finance Corporation and Rural Electrification Corporation. It reassures investors on debt sustainability while preserving growth support.
India Infrastructure Spending 2026 Details
India infrastructure spending 2026 sees a significant boost with ₹12.2 lakh crore capex. Seven high-speed rail corridors connect cities like Mumbai-Pune, Pune-Hyderabad, Hyderabad-Bengaluru, Hyderabad-Chennai, Chennai-Bengaluru, Delhi-Varanasi, and Varanasi-Siliguri.
Focus areas include Tier II and III cities with populations over 5 lakh, through City Economic Regions funded at ₹5,000 crore per region over five years via challenge mode. Four thousand e-buses advance sustainable transport.
Additional allocations cover municipal bond incentives, corporate bond market frameworks, and ship-repair ecosystems in Varanasi and Patna. Dedicated freight corridors and waterway expansions enhance logistics.
These steps aim to attract private investment, reduce risks, and build resilient infrastructure for long-term growth.
Background on Economic Context
India’s economy maintains momentum with growth projections of 6.8-7.2 per cent for 2026-27. Moderate inflation near 2 per cent supports the fiscal strategy. Reforms address global volatility, including reduced import dependencies and enhanced domestic manufacturing.
The budget prioritises public investment as a growth driver while shifting towards debt consolidation over pure deficit targets.
What’s Next India Budget 2026
Implementation of India Budget 2026 measures will unfold over the fiscal year, with monitoring on capex execution, manufacturing incentives, and fiscal targets. Success depends on private sector response and global stability.
India Budget 2026 sets a foundation for sustained reforms and prudent finances.
Published in SouthAsianDesk, February 1st, 2026
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