India's Union Budget for the fiscal year 2026-27, unveiled on February 1, 2026, underscores the importance of fiscal discipline and investment in infrastructure.
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India's Union Budget for the fiscal year 2026-27, unveiled on February 1, 2026, underscores the importance of fiscal discipline, investment in infrastructure, and enhancements in manufacturing to maintain a 7% GDP growth rate in the face of global uncertainties. The primary initiatives focus on improving productivity, generating employment opportunities, and fostering inclusive development, with a projected fiscal deficit of 4.3% of GDP. Let us see how the Budget will have impacts on Indian economy.
From a sectoral viewpoint, the budget is anticipated to yield varied yet generally favourable effects throughout the economy. Manufacturing and labour-intensive sectors are likely to gain from ongoing labour reforms, sustained public investment, and enhanced market access facilitated by recent free trade agreements. The financial services sector—especially entities associated with International Financial Services Centres like GIFT City—stand to benefit from prolonged tax incentives, regulatory transparency, and increased global integration. Export-driven enterprises and MSMEs are expected to face diminished compliance challenges, while individuals and internationally mobile professionals may appreciate procedural streamlining, targeted TCS modifications, and more transparent disclosure processes. Collectively, these initiatives contribute to fortifying a policy landscape that fosters competitiveness and encourages private investment.
Private Investment: The push for the services sector encompasses skill development in health, tourism, AVGC, and the care economy, in addition to support for SMEs through a INR 10,000 crore equity fund and enhancements to TReDS, which will promote job creation and private investment
Self sufficiency: Investments in key sectors such as biopharma (INR 10,000 crore SHAKTI scheme), semiconductors (ISM 2.0), electronics (INR 40,000 crore), and rare earth corridors are intended to bolster manufacturing self-sufficiency and exports
MSMEs: The proposal to establish a dedicated INR 10,000-crore growth fund for micro, small, and medium enterprises (MSMEs) in the Union Budget 2026-27 is will be as a potential “game-changer” for the sector This announcement represents a significant advancement in fortifying India’s MSME ecosystem. This forward-thinking initiative will supply essential capital to assist enterprises in innovating, modernizing, and scaling, while also safeguarding the sector against global trade disruptions. The fund is expected to serve as a catalyst for enhancing competitiveness, broadening access to global markets, and facilitating deeper integration of MSMEs into both domestic and international value chains. The Budget tackles the pressing issue of capital availability for small industries. Mechanisms such as the Credit Guarantee and the Infrastructure Risk Guarantee Fund will play a crucial role in stimulating private investment and incorporating MSMEs into large-scale national projects
Infrastructure: There has been a sustained emphasis on infrastructure over the past three to four years, and several announcements made in the Union Budget, including the high-speed railway corridor, freight corridor, and waterways, among others, are expected to enhance connectivity. Infrastructure development will also contribute to job creation and economic growth
The fiscal responsibility demonstrated by the 4.3% deficit target, along with a strong emphasis on exports, conveys a significant message of macroeconomic stability, which could result in a more stable currency
The Budget prioritises the enhancement of the ease of doing business, and the postponement of customs duty payments for up to 30 days can significantly improve cash flow. This budget is primarily oriented towards long-term benefits rather than immediate returns. Enabling resident purchasers to deduct TDS without the requirement of a TAN alleviates significant obstacles in real estate transactions and is expected to accelerate sales in the secondary market. Additionally, reducing the TCS rate from 5% to 2% for overseas education, medical treatment, and travel directly benefits family cash flow
This adjustment minimises the amount of upfront capital that becomes tied up, particularly for parents sending their children abroad or organising travel, and demonstrates a comprehension of the spending habits of global Indian households.
Prof. Mithilesh Kumar Sinha,
Retired Professor,
Nagaland University, Lumami.