Highlights of Union Budget 2026
The Union Budget 2026 stands as a testament to India’s commitment to balanced growth, combining ambitious infrastructure development with fiscal responsibility. As I watched the Finance Minister present this year’s budget, it became clear that the government is betting big on physical infrastructure while maintaining its focus on digital transformation and social welfare. This budget feels like a carefully orchestrated symphony where each policy instrument plays its part in creating economic harmony.
Infrastructure-led Growth
Massive Push for Roads, Railways, Highways, and Urban Infrastructure:
The government has allocated a record ₹15 lakh crores for infrastructure development, representing a 12% increase from the previous year. This massive investment spans across multiple sectors, with roads and highways receiving ₹3.2 lakh crores alone. The Bharatmala project enters its next phase with 25,000 kilometers of new highway construction planned over the next three years.Urban infrastructure gets a significant boost with the announcement of 50 new smart cities and the expansion of metro rail networks in tier-2 cities. The budget allocates ₹1.8 lakh crores specifically for urban development, focusing on water supply, sewage treatment, and sustainable transportation systems.
"Infrastructure is not just about building roads and bridges; it's about connecting opportunities with people and markets with possibilities."
Capital Expenditure Continues to be the Backbone of Economic Growth:
Capital expenditure (capex) has been increased to ₹18 lakh crores, maintaining the government’s strategy of using public investment to drive private sector participation. This represents 6.2% of GDP, significantly higher than the global average of 3-4% for developing economies.The multiplier effect of this investment is expected to generate employment for approximately 4.5 crore people directly and indirectly. States have been allocated ₹2.5 lakh crores in interest-free loans specifically tied to capital expenditure projects, ensuring that development reaches every corner of the country.
No Major Income Tax Slab Changes
Income Tax Slabs Remain Unchanged:
For the second consecutive year, the government has chosen to keep income tax slabs unchanged, providing stability and predictability for taxpayers. The standard deduction remains at ₹75,000, and the tax-free limit stays at ₹3 lakh for individuals below 60 years.This decision reflects the government’s confidence in its current tax structure and its focus on increasing compliance rather than adjusting rates. Personal income tax collections have grown by 18% year-on-year, indicating that the current system is working effectively.
Focus on Simplifying Tax Laws and Reducing Litigation:
The budget introduces several measures to reduce tax disputes and simplify processes. A new faceless appeal system will be implemented across all income tax ranges, reducing human interface and potential corruption. The government expects this to reduce pending tax cases by 40% within two years.Small taxpayers with income up to ₹10 lakhs will benefit from a simplified return form that can be completed in less than 15 minutes. Digital pre-filled returns will be expanded to include more data sources, making tax filing almost automatic for salaried employees.
Manufacturing & Make in India
Strong Support for Domestic Manufacturing:
The Production Linked Incentive (PLI) scheme receives an additional ₹75,000 crores allocation, expanding to 20 new sectors including furniture, leather goods, and precision instruments. This brings the total PLI commitment to ₹3.2 lakh crores across 27 sectors.Manufacturing GDP is targeted to reach 25% by 2030, up from the current 17%. To support this goal, industrial land banks totaling 50,000 hectares will be developed with plug-and-play infrastructure, reducing setup time for new manufacturing units by 60%.
Incentives for Industrial Growth and Export Competitiveness:
Export promotion receives a significant push with the announcement of 12 new Special Economic Zones (SEZs) and the modernization of 25 existing ones. The government has also introduced a new scheme providing working capital support at subsidized rates for export-oriented units.A 200% tax deduction is now available for R&D expenses in manufacturing, encouraging innovation and technology development. This is particularly relevant as I’ve observed many Indian companies struggle with R&D investments due to immediate cost pressures.
Semiconductor & Technology Push
Major Boost to Semiconductor Manufacturing and High-tech Industries:
The India Semiconductor Mission receives its largest allocation yet with ₹1.2 lakh crores dedicated to building a comprehensive semiconductor ecosystem. Three new fabrication plants will be established in partnership with global leaders, aiming to produce 15% of the world’s semiconductors by 2035.The government announces tax holidays for semiconductor manufacturing units for the first 10 years of operation, along with expedited environmental clearances. This aggressive approach reflects India’s determination to reduce dependency on imports in this critical sector.
Strengthening India’s Strategic and Digital Economy:
A new Digital India 3.0 initiative focuses on emerging technologies like quantum computing, blockchain, and advanced AI systems. ₹25,000 crores have been allocated for this purpose, with specific emphasis on developing indigenous capabilities.The National Mission on Quantum Technologies gets a boost with ₹8,000 crores funding over five years. This includes establishing 20 quantum research centers and training 10,000 quantum scientists and engineers.
MSME Support
Easier Credit Access and Reduced Compliance Burden:
The credit guarantee scheme for MSMEs has been expanded from ₹4.5 lakh crores to ₹6 lakh crores, enabling collateral-free loans up to ₹5 crores. Interest subvention of 2% will be provided for green technology adoption by MSMEs, encouraging sustainable business practices.A single-window clearance system for MSMEs is being implemented across all states, reducing approval time from 60 days to 15 days. This digital platform will integrate all regulatory requirements, from pollution clearance to labor compliance.
MSMEs Positioned as Key Job Creators:
The budget recognizes MSMEs as the backbone of employment generation, setting a target of creating 2 crore new jobs in the MSME sector over the next three years. A new skill-linked wage employment scheme provides salary support for newly hired workers in MSMEs for their first year.Technology adoption receives a push through a ₹15,000 crores fund for MSME digitization, helping small businesses integrate e-commerce, digital payments, and cloud-based solutions into their operations.
Railways & Transport
Modernisation of Railway Infrastructure:
Indian Railways receives its highest-ever allocation of ₹2.8 lakh crores, with ₹1.8 lakh crores dedicated to capacity expansion and modernization. The ambitious plan includes electrification of remaining 5,000 route kilometers and introduction of 50 Vande Bharat trains.Station modernization covers 1,000 stations with world-class amenities, while freight corridor development gets ₹85,000 crores to improve cargo movement efficiency. The Eastern and Western Dedicated Freight Corridors will be fully operational by December 2026.
Focus on Faster Connectivity and Logistics Efficiency:
The National Logistics Policy implementation accelerates with the establishment of 35 multimodal logistics parks across the country. These hubs will integrate road, rail, air, and waterway transport, reducing logistics costs from 14% to 8% of GDP.High-speed rail projects expand beyond Mumbai-Ahmedabad with feasibility studies approved for Delhi-Varanasi and Chennai-Bengaluru corridors. These projects represent India’s leap toward world-class passenger transportation.
Digital & AI Governance
Expansion of Digital Platforms, AI-based Systems:
The budget allocates ₹45,000 crores for digital governance initiatives, with AI and machine learning at the center of government service delivery. Every ministry will implement AI-driven citizen services by March 2027.A National AI Computing Infrastructure with 10,000 GPUs will be established to support research and startups. This infrastructure will be available to universities, research institutions, and startups at subsidized rates, democratizing access to high-performance computing.
Push for Faceless, Paperless, Transparent Administration:
The Digital India initiative enters its next phase with complete digitization of government services. Citizens will access all services through a unified platform using just their Aadhaar number, eliminating the need for multiple registrations and documents.Blockchain technology will be implemented for property records, educational certificates, and legal documents, ensuring tamper-proof verification. This move toward paperless governance is expected to save ₹50,000 crores annually in administrative costs.
Employment & Skill Development
Focus on Youth Employment and Skill Training:
The Pradhan Mantri Kaushal Vikas Yojana receives a significant expansion with ₹35,000 crores allocated for skilling 2.5 crore youth over three years. Special focus is placed on emerging skills like renewable energy, electric vehicle maintenance, and drone technology.A new apprenticeship program will train 15 lakh youth annually in partnership with industry, providing stipends and guaranteed job placement for 80% of participants. This addresses the critical skill gap that I’ve observed in many industries during my interactions with business leaders.
Industry-linked Skilling Initiatives Strengthened:
Sector Skill Councils receive enhanced funding to develop courses aligned with industry 4.0 requirements. Virtual reality and simulation-based training centers will be established in 500 districts, providing hands-on experience without expensive equipment.The budget introduces skill vouchers worth ₹50,000 for unemployed youth, allowing them to choose training programs from certified providers. This market-driven approach ensures skill development responds to actual industry demand.
Social Welfare Focus
Continued Support for Women, Farmers, and Weaker Sections:
The PM Kisan scheme sees an increase in annual support from ₹6,000 to ₹8,000 per beneficiary family, recognizing the impact of inflation on rural households. Additionally, a crop insurance scheme covers 15 crore farmers with enhanced premium subsidies.Women’s empowerment receives a boost through the expansion of self-help group networks to cover 10 crore women. The budget allocates ₹25,000 crores for women-led development programs, including entrepreneurship support and skill development.
Inclusive Growth Remains a Priority:
The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) allocation increases to ₹1.2 lakh crores, ensuring rural employment security while focusing on productive assets creation. Natural resource management and climate adaptation projects will comprise 60% of MGNREGA works.Healthcare infrastructure in rural areas gets strengthened with 50,000 new Ayushman Arogya Mandirs providing comprehensive primary healthcare. Telemedicine services will connect these centers to district hospitals, ensuring quality medical consultation in remote areas.
Fiscal Discipline
Commitment to Controlled Fiscal Deficit:
The government demonstrates fiscal responsibility by targeting a fiscal deficit of 4.5% of GDP for FY 2026-27, down from 5.1% in the previous year. This gradual reduction balances the need for continued public investment with long-term fiscal sustainability.Revenue collection is projected to grow by 12% through improved compliance and economic growth, rather than tax rate increases. The tax-to-GDP ratio is expected to reach 12.5%, bringing India closer to emerging economy averages.
Balance Between Welfare Spending and Capital Investment:
The budget maintains a careful balance with 65% of expenditure going toward capital formation and 35% toward revenue expenditure. This ratio ensures continued infrastructure development while maintaining essential social programs.Subsidy expenditure has been rationalized through better targeting, with direct benefit transfer covering 95% of all subsidy payments. This reduces leakage and ensures support reaches intended beneficiaries while controlling fiscal burden.Union Budget 2026 presents a comprehensive vision for India’s economic transformation, balancing immediate needs with long-term aspirations. The focus on infrastructure, technology, and human development creates a foundation for sustainable growth while maintaining fiscal discipline. As the country moves toward its goal of becoming a developed nation by 2047, this budget serves as a crucial stepping stone, demonstrating that economic growth and social welfare can advance together when backed by thoughtful policy design and committed implementation.