BUDGET-2026 PHILOSOPHY AND ECONOMIC SCENARIO

The Budget 2026 session at the Parliament begun on 29th January, 2026 with the address of President of India and tabling of Economic Survey 2025-26.The Union Finance Minister presented her 9th consecutive Budget for the year 2026-27 today, 1st February, 2026 in the Parliament and also introduced Finance Bill, 2026 in the Lok Sabha.

This year’s Budget for FY 2026-27 has been presented in the background of economic outlook tabled in the Parliament on 29th January, 2026 in the form of Economic Survey 2025-26. According to Economic Survey (2025-26), GDP growth is forecast to be in the range of 6.8% to 7.2% for FY 2027 in the back drop of robust economic fundamentals.

The Union Budget is inspired by three Kartavyas,viz economic growth, aspirations of people and vision. This includes measures and long term reforms in various socio-economic sectors.

BudgetPhilosophy

Government’s ‘Sankalp’ in Budget -2026-27 is to focus on poor, underprivileged and disadvantaged inspired by following three kartavyas:

1. First kartavya is to accelerate and sustain economic growth by enhancing productivity and competitiveness and building resilience to volatile global dynamics.
2. Second kartavya is to fulfil aspirations of our people and build their capacity, making them strong partners in India’s prosperity path.
3. Third kartavya is aligned with vision of Sabka Sath, Sabka Vikas (Development of every family, community, region and sector) ensuring that everyone has access to resources, amenities and opportunities for meaningful participation.

India continues to take confident steps towards Viksit Bharat, balancing ambition with inclusion. As a growing economy with expanding trade and capital needs, India must also remain deeply integrated with global markets, exporting more and attracting stable long-term investments.

With the ongoing macro environmental factors where trade and multi-lateralism are imperiled and access to resources and supply chains are disrupted, this year’s budget focuses to accelerate and sustain economic growth by enhancing productivity, building resilience to volatile global dynamics to fulfill aspirations of our people to for capacity building to ensure every family, community, region and sector has access to resources, amenities and opportunities for meaningful participation.

Interventions proposed:

1. Scaling up manufacturing in 7 strategic and frontier sectors
2. Rejuvenating legacy industrial sectors
3. Creating ‘Champion MSMEs’
4. Delivering a powerful push to Infrastructure
5. Ensuring long-term energy security and stability
6. Developing city economic regions

Emphasis of Budget is on / to:

1. Accelerate & sustain economic growth
2. Inclusive growth and social development
3. Strong focus on manufacturing
4. Reduced critical import dependencies
5. Building future ready strategic sectors
6. Connecting India & mobility transformation
7. Empowering MSMEs and entrepreneurship
8. Ease of doing business
9. Energy transition and security

Major focus areas of Budget:

1. Boost Manufacturing sectors for sustaining economic growth
2. Strengthening the foundations of growth in infrastructure
3. Ensuring long-term energy security and stability
4. Renewing the emphasis on services sector & tax reforms
5. High level committee on banking
6. Enhancing productivity in agricultural and allied sectors
7. Urbanization in city economic regions
8. Major people centric development
9. Supporting MSMEs grow as ‘champions’

Major transformation measures are proposed in the domains of:

1. Measures for Manufacturing Sectors - India Semiconductor Mission (ISM) 2.0, Bio-pharma SHAKTI, Hi-Tech Tool Rooms in CPSEs & Tax reforms to boost the Industry
2. Measures for MSMEs - Equity Support, Liquidity Support through TReDS, Professional Support
3. Measures for Infrastructure Sectors - focus on developing infrastructure in cities with over 5 lakh population, large-scale enhancement of public infrastructure - InVITs, REITs, NIIF and NABFID
4. Measures for Urban development - 7 High-Speed Rail corridors, Focus on Tier II, Tier III cities, and temple-towns
5. Measures for Service Sectors - New institutions for Allied Health Professionals (AHPs), Developing NSQF-aligned programmes to training, 3 new All India Institutes of Ayurveda, Setting up AVGC Content Creator Labs
6. People Centric Development - Self-Help Entrepreneur (SHE) Marts to be set up, Divyangjan Kaushal Yojana, Trauma Care Centres in district hospitals.

Budget Glimpses

• Yuva shakti-driven budget emphasizes on Government’s ‘sankalp’ to focus on poor, underprivileged and the disadvantaged
• First budget prepared in kartavya bhawan inspired by 3 kartavyas
• New Income Tax Act, 2025 to come into effect from April 2026. Simplified income tax rules and forms to be notified shortly
• Ministry to set up joint committee to modify IndAS to do away with separate accounting requirement based on ICDS from tax year 2027-28
• Seven high-speed rail corridors between cities will be developed as ‘growth connectors’ to promote environmentally sustainable passenger systems
• Proposals aimed at ease of doing business, ease of living and ease for taxpayers

Indian Economy and Economic State of Affairs

The 687 page document of Economic Survey for the year 2025-26 was tabled in Parliament on 29th January, 2026 on first day of Budget session. It presents a comprehensive picture of India’s reforms progress in a challenging global environment. It hints at strong macro-economic parameters, sustained growth momentum and expanding role of innovation, entrepreneurship and infrastructure in national development. It also outlines a road map for moving forward towards ‘Viksit Bharat’.

Report of 16th Finance Commission

The report of 16th Finance Commission has also been tabled. It has outlined a path for fiscal consolidation for Union Government while balancing developmental priorities with fiscal prudence. It has recommended to eliminate revenue deficit in five years. Tightening of revenue balance and capex expansion are expected to reduce fiscal deficit from 4.4% of GDP in FY 2026 to 3.5% in FY 2031.

In the report, it has retained the vertical devolution share at 41% till 2031 but weights to parameters have been changed keeping in mind that faster growing states are rewarded, i.e. there is a new criteria of contribution to GDP. However, it has retained its core principle of equitable redistribution of resources among poorer states. States such as Uttar Pradesh, Bihar, Madhya Pradesh and West Bengal World get to higher share. The report is binding on the Government for sharing formula.

Highlights of Economic Survey

The Budget and the Economic Survey point at the following State of Affairs of Indian Economy and measures being taken:

• The Budget re-iterates the aspiration for a Vikisit Bharat by 2047
• Indian economic growth remains steady amid global uncertainties and is consumer-led
• Indian economy continues to be the fastest growing economy among all major global economies
• India’s economic growth to be between 6.8% to 7.2% in FY 2026-27 (7.4% in 2025-26)
• Nominal GDP is projected to grow by 10% over the first advance estimates of FY 2025-26
• Fiscal deficit for be 2026-27 is estimated at 4.3%,while fiscal deficit for re 2025-26 is 4.4%
• The government reaffirms its medium term goal of lowering the debt-GDP ratio towards 50% by 2030, currently estimated at 55.6% of GDP for 2026-27 (56.1% in 2025-26)
• Gross tax revenue is estimated at 11.2% of GDP for BE 2026-27.
• Revenue receipts for 2026-27 estimated to be Rs. 35,33,150 crore (Revised BE for 2025-26 - Rs. 3,34,72,323 crore)
• Total tax revenue (net to Union) for 2026-27 estimated at Rs. 28,66,922 crore
• Service sector remains primary driver of growth expanding by 9.1%.
• Services sector contribution to GDP is over 50%
• Manufacturing share in GDP has declined in nominal terms (12.61%) and real terms (15.71%)
• India has witnessed highest reduction in inflation among major economies in 2025
• Inflation to remain benign in 2026-27 with core inflation at 4.62% and head line inflation at 1.3%
• Gross foreign direct investment (FDI) inflows were recorded at USD 81.0 billion in FY 25.
• Despite strong fundamentals, Indian rupee has under -performed and is likely to be under pressure in 2026.
• Proposed creation of AI Economic Council to manage AI deployment.
• Orange economy (live concerts, entertainment etc) is new growth engine.