New Delhi | Finance Minister Nirmala Sitharaman on Sunday announced measures to boost manufacturing, offered long-term tax incentives for global data centres, and support for agriculture and tourism as she unveiled a Rs 53.5 lakh crore Union Budget for 2026-27, seen as a long-term blueprint for sustaining growth amid rising global risks.
Shunning populist measures despite five key states, including West Bengal and Tamil Nadu, heading to polls, the Budget signalled continued fiscal consolidation and infrastructure spending.
But a hike in securities transaction tax on equity derivatives rattled equity markets, with key indices plunging as much as 2 per cent in the special budget-day trading session, before recovering some ground.
Presenting her record ninth consecutive Budget, Sitharaman, in her nearly 90-minute speech in the Lok Sabha, announced detailed anchor schemes for becoming 'Viksit Bharat' - boosting employment, while combining technologies of the future with legacy industries.
Maintaining emphasis on infrastructure development, capital expenditure has been raised to Rs 12.2 lakh crore next year from an already record-high Rs 11.2 lakh crore in FY26. Among the many infrastructure projects announced by the minister was a plan to build 7 high-speed rail corridors, while defence expenditure is up by about a fifth on the year.
Amid geopolitical concerns, fragmentation, and financial tightening across the globe, she said manufacturing will be scaled up across seven priority sectors - pharmaceuticals, semiconductors, rare-earth magnets, chemicals, capital goods, textiles and sports goods - with an emphasis on job creation and technology-driven development. The success of Apple iPhone manufacturing prompted doubling of outlay on electronics manufacturing to Rs 40,000 crore, and a second iteration of the semiconductor mission was mentioned to help build the supply chain.
While there were no major changes to personal income-tax slabs, the government announced tax and incentive measures aimed at boosting investment and ease of compliance for the industry.
Sitharaman announced a Rs 10,000 crore investment over five years to develop India as a biopharma manufacturing hub, rare earth corridors, textile parks, more container manufacturing, chemical parks, measures to strengthen capital goods manufacturing and efforts to revive 200 legacy industrial clusters, among others, to boost industry.
A major announcement was a 20-year tax holiday for overseas firms providing global data centre services from India, along with a 15 per cent safe harbour on costs for data centre services provided by related entities of foreign cloud firms.
The move is expected to provide tax certainty and operational efficiency for global cloud players, as India attracts large-scale investments from firms, such as Google, Microsoft and Amazon Web Services, which have committed about USD 40 billion in 2025 alone.
The Budget also simplified the customs regime, rationalising exemptions, waiving duties on 17 cancer drugs, easing baggage rules and cutting duty on personal imports to 10 per cent. Support was announced for livestock, fisheries, high-value agriculture and textiles, while tourism proposals included eco-friendly mountain trails in Himachal Pradesh, Uttarakhand and Jammu and Kashmir, and the development of 15 archaeological sites.
To support small businesses, the government proposed a Rs 10,000 crore SME Growth Fund to help scale future champions.
On the fiscal front, the government reiterated its consolidation path, targeting a reduction in the debt-to-GDP ratio to 55.6 per cent next year from 56.1 per cent and the fiscal deficit to 4.3 per cent from 4.4 per cent. It plans to borrow Rs 17.2 lakh crore from bond markets, where yields have firmed amid heavy supply.
Tax measures included a hike in securities transaction tax on futures trading to 0.05 per cent from 0.02 per cent and to 0.15 per cent from 0.01 per cent on options, taxing share buybacks as capital gains, cuts in TCS on overseas tours, education and medical expenses, and implementation of the new Income Tax Act from April 1.
"Today, we face an external environment in which trade and multilateralism are imperilled and access to resources and supply chains are disrupted. New technologies are transforming production systems while sharply increasing demands on water, energy and critical minerals," she said in her Budget speech.
India, she said, will continue 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 investment," she noted.
At a press conference post-presentation of the Budget, Sitharaman defended the STT increase, saying this was done with a view to discouraging small investors from speculative trading in derivatives.
Prime Minister Narendra Modi described the Union Budget 2026-27 as "historic", saying it reflected the aspirations of 140 crore Indians and strengthened the reform journey and charted a clear roadmap for Viksit Bharat.
Modi also said the Budget was a "highway of opportunities".
"This Budget is the foundation for our journey towards a Viksit Bharat by 2047. This year's Budget will give India's reform express new energy and new momentum," he said. "We want to become the world's third-largest economy as soon as possible."
The Budget seeks to accelerate the shift to a simpler corporate tax regime through changes to Minimum Alternate Tax (MAT) provisions. Companies opting for the new regime will now be allowed to set off accumulated MAT credit, capped at 25 per cent of annual tax liability. From April 1, 2026, MAT will become a final tax with no credit available for set-off, further incentivising migration to the new regime.
While the fine print shows disputed corporate and personal tax demands have risen to about Rs 15 lakh crore from around Rs 13 lakh crore, the Budget does not propose steps to curb the buildup. Some relief has been offered through a cut in the pre-deposit requirement for tax appeals to 10 per cent from 20 per cent of the core tax demand.
Other key announcements include raising the investment limit for Persons of Indian Origin (PROI) in Indian listed companies from 5 per cent to 10 per cent, with the aggregate limit increased to 24 per cent from 10 per cent.
To support energy transition, a rare earth corridor is proposed to be established in Odisha, Andhra Pradesh, Kerala and Tamil Nadu, alongside customs-duty exemptions for capital goods used in critical mineral processing.
The Rs 20,000-crore CCUS programme provides a credible pathway to decarbonise power, steel and cement, while extending customs-duty exemptions for nuclear projects till 2035, strengthening long-term base-load stability.
On the tax front, exemptions for battery energy storage systems, lithium-ion cells, solar-glass inputs and biogas-blended CNG materially improve project viability.
Acknowledgement of sports goods, an underinvested sunrise sector, marks a turning point for MSMEs and companies in the sector to find access to large global markets. Boost to agriculture segments, such as dairy, poultry, fisheries and MSMEs have been well aimed to drive inclusive development.
While the expectations were for big bang customs reforms, the Budget focused on promoting domestic manufacturing in certain sectors like renewable energy, aviation, and electronic goods by reducing customs duties on components and capital goods. One-time relief for SEZ units supplying goods to domestic tariff areas may help in somehow neutralising US Tariffs.
The allocation of Rs 7.85 lakh crore to defence, with capital modernisation crossing Rs 2 lakh crore for the first time.
Commenting on the Budget, Christian de Guzman, Senior Vice President, Moody's Ratings, said in addition to the continued spending on infrastructure, the Budget provides tactical support for the economy against the backdrop of prevailing external uncertainties, including the unresolved issues around US tariffs, and despite the proven resilience of economic growth over the past year.
"At the same time, support for the economy, which includes measures announced in recent months such as GST rationalisation, will lead to an ongoing erosion of tax revenue as a share of GDP that will worsen debt affordability as measured by interest payments relative to revenue.
Moreover, we do not expect significant progress on debt reduction, which supplants deficit consolidation as the anchor for fiscal policy, leaving our broader assessment of India's fiscal strength intact."
