UNION BUDGET 2026-27: FEW OBSERVATIONS

As the Economic Survey 2025-26  has laid out an ambitious economic and Governance plan predicting bright India,amidst darker world and consequently pluging Country's growth 2025-26 at 7 %  higher than 6.5% estimated earlier. Budget for 2026-27  presented by the Finance Minister focused on 3 core aspects namely 1.accelerating economic growth by enhancing productivity and competitiveness  and building resilience to volatile  global dynamics 2.Building human capital to fulfill aspirations of people and build their capacity, making them partners in India's  path to prosperity and 3.Ensuring inclusive development under the vision of "Sabka Saath Sabka Vikas".so that every family, community, region sector has access to resources, amenities and opportunities for meaningful participation and inclusive growth.

 According to Finance Minister  over the years Government have pursued far reaching structural reforms, fiscal prudence and monetary stability whilst maintaining strong thurst on public investment ...built domestic manufacturing capacity, energy and reduced critical import dependencies.Accordingly they have mainly identified ten sectors comprising of -biopharma,Semiconductors, rare earths,chemical parks,logistics, metro corridors, MSMEs, lab to work station , agri diversity, and  'orange  economy' (economy driven by creativity culture and intellectual property which encompasses industries like media film gaming  fashion design, cultural heritage and software).It has been observed that present Yuva Shakti  driven budget also focused on the needs of poor, underprivileged and the disadvantaged sections so as to balance both ambition and inclusion. Externally India must remain deeply integrated with global markets, and address issues related to trade and multilateralism ,supply chain disruptions, global markets attracting stable investments etc, Emerging technologies are transforming production systems while sharply increasing demand for water,  energy and critical minerals. For the development of labour intensive textile sector integrated programs were proposed. Increase in defence expenditure were to the tune of 15.1% in 2026-27 budget expenditure compared to 2025-26The momentum of structural reforms is maintained at the comprehensive Economic levels to boost productivity, employment and accelerating growth. Over 350 reform measures have been ruled out Including GST simplification, notification of labour Codes and rationalisation of mandatory  quality control orders, Further High Level  Committees are  with Cenral Government and state Governments working together for deregulation and reducing compliance requirements have been formed .

BUDGETARY PROVISIONS 

Major highlight programs of the budget are dedicated corridors for mining, R&D and manufacturing rare earths, 3 dedicated Chemical parks on a cluster based plug-anx play model, Electronics components manufacturing scheme with increased allocation of ₹ 40000 crores,Bio pharma with outlay of ₹ 10000 crores over 5 years.,₹ 10000crores for SME  growth, for container  manufacturing at ₹ 10000 crores over 5 years, and most significantly  tax holiday for foreign companies providing cloud computing services through  data centers in India.In the rural sector Replacement of MGNREGA withV B- BG-RAM G provided allocation of ₹ 95000 crores butctransforming the fully sponsored Central program into 60 : 40  Centre  state share of financial contribution.Even though the number of days for eligible employment days has been increased from 100 to 125 days indidual stares capacity to provide adequate financial allocation is very doubtful. Tne budget estimate showed 21% of reciepts come from income tax,18% from corporate taxes, 15 % from GST and other taxes, 6%from Union Excise duty,Non Tax revenues 10%,non debt capital reiciepts 2% whereas Government's borrowing and liabilities is estimated to be nearly one fourth (24%) of total reciepts.On the expenditure front,  State's share of taxes amount to 22%, interest payment alone account for one fifth (20%) Central sector schemes 17 %,Defence expenditure 11%,Other expenditures 7%Major subsidies 6% and civil pension 2%.As per Budget figures - Actual revenue reciepts were30.4 lakh crores for 2024-25,budget estimate for 2025-26 were 34.2 lakh crores which slightly reduced  to ₹ 33.4 Lakh crores in the revised estimate,which incrased in budget estimate of the year 2026-27 to ₹ 35.3 lakh crores.Effective capital expenditure was 13.2 lakh crores in 2024-25 (actuals) 15.5 lakh crores in 2025-26  (BE) and 14.0 lakh crores RE for 2025-26, whereas  the budget estimate for 2026-27 is rupees11 lakh  crores. On the otherhand Actual revenue expenditure stood at ₹ 36.0 lakh crores for 2024-25  as against 2025-26 BE of ₹39.4  lakh crores and revised estimate of ₹ 38.7 lakh crores for  2025-26. In any case budget estimate for the current year 2026-27 it is estimated as ₹ 41.3 lakh crores. 

 

.FEW OBSERVATIONS  

For sustained growth budget propose to build the eco system with structural reforms to make sure creation of an environment to increase productivity and competitiveness and building resilience to volatile global dynamics. Significantly the effective capital expenditure as a share of GDP increased substantially to 4.4 % in 2026-27         For  vitalising as a major engine of growth it is proposed to promote ecologically power of agglomeration by mapping city economic regions. The budget 2026-27give a big push to manufacturing including- biopharma, Semiconductors, electronics, Rare earths capital goods and leather products. While textiles and leather are labour intensive sectors sectors others are capital intensive high tech manufacturing. 

In recent years persistent implementation lapses and continuous under spending  do happen in annual budgets. According to one study  nearly half of the Ministries spent less than 80% of their allocated funds during FY 2024-25 with 12-13% spending less than 50% in recent years. Similarly Ministries of tourism, labour,employment, and skill development consistently under utillise funds resulting in systemic bottlenecks. Fiscal consolidation through spending cuts has drawn much criticism particularly in the revenue account. Digital Governance and strategic priorities also remained under funded.  .In India AI Mission budget was slashed by 50% .Digital governamce and strategic priorities also remain under funded and fragmented. On the otherhand heavy focus on capital intensive sectors like semiconductors and biopharma etc were given. But they  the risk problem of unemployment because they are less labour absorbing. Major programs are also grouped as highly pro business   elitistic and reform oriented with huge infrastructure support, PLI scheme, tax cuts etc,but failing  to address unemployment and capable of deteriorating structural inequalities. With a fiscal deficit target of 4.3% of GDP, depending on the requirements of the nation the fiscal deficit target need not be highly rigid. It has been observed that One of the reasons attributed to outflows of net FDI has been the huge environmental pollution prevalent in the country particularly in big cities. According to a word Bank study an estimated 1.7 million deaths occurs annually due  to air pollution leading to reduction in work force and productivity. This needs to be tackled on a warfooting with appropriate policy instruments like polluter pay principle,green infrastructure push or with the  help of new urban challenge fund.

CONCLUDING OBSERVATIONS 

Amidst the  prevailing geo political and external uncertainty budget 2026-27 marginally increases social sector spending like in education  to  0.35% of GDP from 0.34% and health out lay  from 0.26%  to 0.27%. Budget 2026-27 provide  a major thrust to manufacturing sector including high tech manufacturing like semiconductors, biopharma,electronics and labour intensive textiles, footwear, jewellery and. MSME sectors . The allocations on health care,environment and agriculture are inadequate . Capital expenditure push especially in infrastructure sector is commendable but private infrastructure investment is not at all catching up. Eventhough personal income tax revenue is higher than corporation tax revenue no incentive is provided to personal income tax payers.Centre should provide full funding for the new rural employment guarantee program especially for debt distressed states.while central Government debt is projected to ease to 55.6% of GDP in 2026-27, fiscal deficit will be  at 4.4% of GDP. In any case the temptation to make big announcement along with heavy expenditure figures later resulting in only  marginal utilisation in certain sectors of the economy must be curbed promptly with due responsibility.