A budget for scale, stability, strategy

The Union Budget for 2026-27, presented in Parliament today by Finance Minister Nirmala Sitharaman, is best read as a deliberate consolidation of the Government’s medium-term economic strategy. In a global environment marked by persistent trade frictions, slowing growth in advanced economies, and renewed anxieties around supply chains, the budget places its bets on domestic capacity-building. The emphasis is clear: scale up public investment, crowd in private capital, deepen technological capability, and continue the long, unglamorous work of reform and deregulation.

The budget continues Government’s significant commitment to infrastructure. Capital expenditure for 2026-27 has been set at a record INR 12.2 lakh crore, up from about INR 11.2 lakh crore in the current year, marking an increase of nearly 9 per cent. This follows several years in which central Government capex has risen sharply, from INR 2 lakh crore in FY 2015, underscoring a decisive shift in the composition of public spending away from consumption and toward investment.

Transport infrastructure remains a priority within this envelope. Seven new high-speed rail corridors have been announced, connecting major economic and industrial clusters such as Mumbai-Pune, Pune-Hyderabad, Hyderabad-Bengaluru, Chennai-Bengaluru, Delhi-Varanasi and Varanasi-Siliguri. These corridors are expected to be developed over the coming decade, with phased execution and blended financing models, and are aimed at sharply reducing travel times, easing congestion on existing networks, and integrating labour markets across regions.

Alongside passenger mobility, the budget continues to emphasise logistics efficiency. Enhanced freight corridors, expansion of multimodal logistics parks, and the operationalisation of around 20 national waterways are intended to lower logistics costs, which remain high by international standards. Complementing this is a push toward spatially balanced growth through the creation of City Economic Regions. These regions are to be supported by dedicated funding: INR 5,000 crore per region over a five-year period to strengthen urban infrastructure, industrial clusters, and service ecosystems in tier-2 and tier-3 cities. The intent is to create new growth poles that can absorb labour, reduce pressure on large metros, and support more even regional development.

If infrastructure provides the physical backbone of the budget, technology and innovation supply its strategic edge. The announcement of the India Semiconductor Mission 2.0, backed by an expanded outlay of INR 40,000 crore, is emblematic of the Government’s ambition to move India up the global value chain. Semiconductors are no longer viewed merely as an industrial input but as a strategic asset, central to economic security and technological sovereignty. The renewed push covers not just fabrication but also design ecosystems and supply-chain infrastructure, suggesting a more holistic understanding of what it takes to build competitiveness in this space. In parallel, the budget allocates around INR 40,000 crore under various production-linked incentive schemes for electronics manufacturing, reinforcing India’s ambition to emerge as a significant node in global electronics value chains.

Reforms and deregulation, while less dramatic, form a critical undercurrent of the budget. The finance minister noted that over 350 reform measures have been implemented in recent years, spanning GST simplification, the rollout of the labour code, and the rationalisation of quality control orders. The proposal to constitute a high-level committee to review the banking and financial sector fits within this broader reform arc. Its mandate is expected to include improving credit delivery, reviewing regulatory overlaps, and aligning financial sector architecture with the needs of a growing, increasingly formal economy. The budget also introduces a INR 10,000 crore MSME Growth Fund. Rather than blanket subsidies, the fund is intended to provide targeted growth capital to viable micro, small and medium enterprises through ‘Corporate Mitras’, helping them scale up, integrate into global value chains, and withstand external shocks over the medium term.

From a macroeconomic standpoint, the budget seeks to strike a careful balance. The fiscal deficit target of 4.3 per cent of GDP represents a modest but meaningful step toward consolidation, even as capital spending rises. Gross market borrowings are projected at around INR 17.2 trillion, with net borrowings of approximately INR 11.7 trillion, calibrated to meet funding needs without destabilising debt markets. This reflects a conscious effort to maintain macroeconomic credibility while using the public balance sheet to support growth. Official projections, drawing on the Economic Survey, place real GDP growth in the range of 6.8 to 7.2 per cent, suggesting confidence that domestic investment and reform momentum can offset a challenging external environment.

Taken together, the 2026-27 budget reads as a document of intent. It avoids large populist gestures, instead reinforcing a development model anchored in infrastructure, technology and incremental reform. For seasoned observers, its significance lies less in any single announcement than in the consistency of direction it represents. In a period of global uncertainty, the Government has chosen to double down on building capabilities at home, easing regulatory constraints, and using public investment as a catalyst for private initiative. As a statement of priorities, the budget offers a coherent and credible roadmap for India’s next phase of growth.

(The author is Member - Economic Advisory Council to the Prime Minister & Professor of Finance) Views expressed are personal