The Union Budget for 2026–27, presented by Finance Minister Nirmala Sitharaman in Parliament on Saturday, has laid out a comprehensive fiscal roadmap aimed at sustaining economic growth, strengthening infrastructure, enhancing national security and maintaining fiscal discipline amid global uncertainty.

The Budget pegs the total expenditure of the Union government at ₹53.5 lakh crore for FY27, marking a sharp increase from the revised estimate of about ₹49.6 lakh crore in FY26. The increase reflects the government’s continued emphasis on public investment, defence preparedness and social sector spending.

According to Budget documents, total receipts excluding borrowings are estimated at ₹36.5 lakh crore, while gross tax revenue is projected at ₹44.04 lakh crore, up from ₹42.7 lakh crore in the current financial year. Net tax receipts to the Centre are estimated at ₹28.7 lakh crore after devolution to states.

To bridge the gap between receipts and expenditure, the Centre has proposed gross market borrowings of ₹17.2 lakh crore, with net market borrowings pegged at ₹11.7 lakh crore for 2026–27.

Fiscal Deficit and Debt Position

The government has projected the fiscal deficit at 4.3 per cent of GDP for FY27, marginally lower than the previous year, signalling a continued commitment to fiscal consolidation. The debt-to-GDP ratio is estimated at 55.6 per cent, compared with around 56.1 per cent in FY26, indicating a gradual reduction in sovereign debt levels.

Finance Minister Sitharaman said the government remains focused on balancing growth imperatives with macroeconomic stability, even as it scales up spending on infrastructure and security.

Capital Expenditure at Record High

Capital expenditure has once again emerged as a central pillar of the Budget. The government has allocated ₹12.2 lakh crore towards capital expenditure in FY27, compared to ₹11.2 lakh crore in FY26. At 4.4 per cent of GDP, capex remains at its highest level in over a decade.

The enhanced allocation will support investments in roads, railways, ports, urban infrastructure, logistics and digital connectivity, with the aim of crowding in private investment and improving long-term productivity.

The Ministry of Road Transport and Highways has been allocated around ₹3.09 lakh crore, while Indian Railways has received ₹2.81 lakh crore, continuing the focus on network expansion, modernisation and safety.

Defence Allocation Sees Major Jump

Defence spending witnessed one of the most significant increases in the Union Budget. The total defence allocation for FY27 has been pegged at ₹7.84 lakh crore, up from ₹6.81 lakh crore in FY26.

Of this, capital outlay stands at ₹2.19 lakh crore, reflecting a strong push towards military modernisation and indigenous defence manufacturing. Revenue expenditure, including pensions and operational costs, has been placed at ₹5.54 lakh crore.

Within the capital budget, allocations include ₹63,733 crore for aircraft and aero engines, ₹25,023 crore for naval platforms, and enhanced funding for missiles, armoured vehicles and advanced defence technologies.

Taxation: Stability and Simplification

The Budget has maintained status quo on personal income tax slabs, providing stability to taxpayers. The government reiterated its commitment to simplifying tax administration and reducing litigation.

The Finance Minister confirmed that the new Income Tax Act, 2025, which aims to replace the Income Tax Act of 1961, will come into effect from April 1, 2026, introducing clearer language and streamlined procedures.

On the indirect tax front, customs duties were rationalised to support domestic manufacturing by reducing duties on selected capital goods and raw materials, while levies on certain imported luxury items were increased.

Ministry-wise Allocations

Among all ministries, the Ministry of Finance received the largest allocation at approximately ₹19.72 lakh crore, primarily towards interest payments, subsidies and transfers.

The Ministry of Home Affairs has been allocated around ₹2.55 lakh crore, while the Ministry of Consumer Affairs, Food and Public Distribution received ₹2.39 lakh crore, reflecting continued support for food security and subsidies.

The Ministry of Education has been allocated about ₹1.39 lakh crore, with increased funding for school education, higher education and skill development. The Ministry of Health and Family Welfare has received approximately ₹1.06 lakh crore, aimed at strengthening public healthcare infrastructure and services.

Agriculture and Rural Economy

Agriculture and rural development remain key focus areas. The Budget continues support for minimum support price (MSP) operations, irrigation projects and agri-infrastructure development. Allocations for rural employment schemes and farmer welfare programmes have been maintained to support rural incomes and consumption.

MSMEs, Employment and Industry

To support job creation and small businesses, the government expanded credit guarantee schemes for micro, small and medium enterprises (MSMEs) and announced measures to ease access to institutional finance. Skill development programmes received higher allocations to align workforce capabilities with emerging industry needs.

The manufacturing and export sectors are expected to benefit from infrastructure investments, stable tax policies and continued incentives under production-linked incentive (PLI) schemes.

Green Growth and Energy Transition

The Budget reaffirmed India’s commitment to sustainable development, with increased allocations for renewable energy, green hydrogen, electric mobility and climate-resilient infrastructure. Incentives for electric vehicles and clean energy projects were extended to support the transition to a low-carbon economy.

Market Borrowing and Revenue Outlook

The government expects improved tax buoyancy, supported by steady economic growth and compliance measures. Gross tax revenue growth is projected to support higher spending without significantly widening the deficit.

Bond markets are expected to closely track the government’s borrowing programme and fiscal trajectory in the coming months.

Overall Assessment

The Union Budget 2026–27 presents a calibrated approach focused on infrastructure-led growth, defence preparedness, fiscal prudence and inclusive development. By sustaining high public investment while gradually lowering the fiscal deficit, the government aims to support economic momentum amid global headwinds.

While the immediate impact will be seen in infrastructure activity and defence manufacturing, the broader effects of the Budget are expected to unfold through higher private investment, job creation and improved economic resilience in the years ahead.

Full Budget: budget_speech-2026