As India prepares for the Union Budget 2026–27, expectations are running high. Scheduled to be presented on 1 February 2026, the Budget comes at a critical juncture—marked by global economic uncertainty, evolving trade dynamics, and India’s long-term ambition of achieving the Viksit Bharat 2047 vision.
This year’s Budget is expected to balance fiscal discipline with growth priorities, while addressing sector-specific challenges across infrastructure, digital finance, manufacturing, clean energy, MSMEs, and employment.
Here’s a comprehensive look at the major themes and expectations shaping Union Budget 2026.
Why union budget 2026 is crucial?
Union Budget 2026 is seen as more than just an annual financial exercise. It is expected to:
- Strengthen India’s economic resilience amid global headwinds
- Maintain momentum in capital expenditure without widening fiscal stress
- Support long-term reforms rather than short-term populist measures
- Enable inclusive growth across urban, semi-urban, and rural India
With recommendations from the 16th Finance Commission set to influence fiscal transfers, this Budget will also define Centre–State financial dynamics for the next five years.
Fiscal strategy: Discipline with continued CAPEX push
Economic assessments suggest that the government may continue its medium-term fiscal consolidation path while sustaining high public investment.
Key fiscal expectations include:
- Fiscal deficit around 4.3% of GDP in FY27
- Capital expenditure rising by nearly 14%, driven by infrastructure and connectivity
- Gross market borrowings increasing to support higher capex and debt redemptions
- Direct tax collections leading revenue growth, while GST growth remains moderate
This signals continuity in policy—focusing on long-term capacity building rather than sudden spending spikes.
Infrastructure, housing, and urban development in focus
Real estate & housing
Industry leaders are calling for:
- Policy stability and faster approvals
- Infrastructure-led urban expansion in Tier 2 and Tier 3 cities
- Support for green and sustainable housing
- Measures to boost housing demand and NRI investments
A steady policy framework is seen as critical for maintaining investor confidence and housing-led economic growth.
Rail, roads & multimodal transport
Mobility and logistics are expected to remain central, with emphasis on:
- Rail modernisation and high-capacity corridors
- Multimodal transport integration
- Technology adoption and PPP models
- Reduced logistics costs and lower carbon footprint
Digital finance: Moving beyond adoption to impact
While India has achieved global leadership in digital payments, Budget 2026 is expected to focus on deepening digital finance usage, especially in rural and semi-urban areas.
Key themes include:
- Strengthening last-mile digital financial infrastructure
- Enhancing reliability and security of digital transactions
- Enabling small businesses and micro-entrepreneurs to fully participate in the formal economy
For MSMEs, this could translate into better access to credit, faster settlements, and improved financial visibility.
GST & taxation
Corporate India is largely seeking a predictable and reform-oriented Budget rather than headline-driven tax changes.
Notable GST-related expectations include:
- Rationalisation of GST structures in specific sectors
- Addressing rate mismatches, especially in emerging industries like electric mobility
- Simplifying compliance to reduce operational friction
For businesses, consistency and clarity in tax policies remain more valuable than short-term incentives.
Electric mobility & clean energy: Aligning policy with adoption
Electric vehicles
Industry participants have flagged GST inconsistencies—particularly the higher tax rate on EV batteries—as a barrier to faster adoption. Aligning GST rates across EVs and core components could:
- Reduce total ownership costs
- Enable innovative models like battery-as-a-service
- Accelerate adoption among commercial and fleet users
Renewables & green hydrogen
The clean energy sector is looking for:
- Support for energy storage and hybrid projects
- Incentives for domestic manufacturing
- Stronger push for green hydrogen under the National Green Hydrogen Mission
These measures are seen as essential for India’s low-carbon industrial transition.
MSMEs, credit access & financial inclusion
Access to affordable, formal credit remains a major theme ahead of Budget 2026.
Key expectations include:
- Greater recognition of secured lending models for first-time borrowers
- Support for digital credit innovations
- Lower cost of funds for NBFCs serving under-banked segments
Such measures could strengthen consumption, entrepreneurship, and financial resilience at the grassroots level.
Insurance, healthcare & pharma innovation
Insurance
The general insurance sector is transitioning from rapid expansion to sustainable growth. Budget expectations include:
- Incentives for micro-insurance and social sector coverage
- Measures to improve affordability and penetration
- Stronger risk governance frameworks
Pharmaceuticals & healthcare
The pharma industry is seeking:
- Simplification of tax provisions affecting R&D
- Restoration of weighted tax deductions for in-house research
- Support for innovation in diagnostics, anti-infectives, and medical technology
Healthcare innovation is increasingly viewed as both an economic and public health priority.
Technology, AI & skilling the workforce
Union Budget 2026 is also expected to place technology at the heart of employment and skilling strategies.
Stakeholders are advocating:
- Use of AI-driven tools for large-scale skilling and career readiness
- Purpose-built learning technologies that deliver measurable outcomes
- Stronger alignment between education, employability, and industry needs
A national focus on “technology-enabled inclusion” could help bridge the gap between qualifications and jobs.
Tourism, hospitality & creative economy
Tourism & hospitality
The sector is seeking:
- Infrastructure status for hospitality
- Better connectivity to tourism clusters
- GST rationalisation and input tax credit support
- Incentives for niche tourism segments such as medical, sustainable, and MICE tourism
Creative & digital economy
There is growing emphasis on:
- Supporting original IP creation
- Incentivising export-oriented creative industries
- Simplifying tax frameworks for digital and IP-led businesses
These sectors are seen as high-potential job creators for India’s youth.
What businesses should watch out for in budget 2026?
Based on expert opinions, businesses should be prepared for possible changes in:
- Tax structures and slabs
- Compliance timelines and reporting
- MSME-focused incentives
- Digital compliance requirements
Final thoughts
Union Budget 2026 is shaping up to be a reform-driven, stability-focused budget, prioritising long-term growth over short-term announcements. With sustained capex, digital deepening, clean energy push, and technology-led skilling, the budget is expected to strengthen India’s economic foundation while keeping fiscal risks in check.
For businesses, staying informed and prepared will be key to navigating the opportunities and changes that follow.
