Union Budget 2026-27 Review

The Government, in line with its continued objective of fiscal consolidation, has maintained its commitment to bringing down the fiscal deficit while supporting economic growth. As per the Union Budget 2026-27, the fiscal deficit for FY2025-26 is estimated at 4.4% of GDP, while the FY2026-27 target is pegged at 4.3% of GDP. The reduction has been supported by resilient tax collections and reforms in non-tax revenue streams, reflecting sustained discipline in revenue mobilisation and expenditure management.

For FY2025-26, the Government continued its strong focus on infrastructure investment, with capital expenditure rising to about ₹10.96 lakh crore (Revised Estimate). The FY2026-27 Budget further increases the allocation to ₹12.2 lakh crore, supporting economic growth, employment creation and long-term productive capacity while maintaining fiscal discipline.

Budget 2026 lays out a strategic roadmap for Viksit Bharat, combining tax and financial reforms with increased investment in high-technology and industrial capacity. Tax reforms include reducing TCS on foreign tour packages to a flat 2%, rationalising TCS on LRS education and medical expenses and specified goods to 2%, and simplifying TDS on specified services to rates of 1% or 2%.

Securities Transaction Tax (STT) on derivatives has been increased to 0.05% for futures and 0.15% for options premium and exercise. These measures are part of the broader effort to streamline the tax framework while strengthening revenue mobilisation.

Dedicated Rare Earth Corridors will be established in mineral-rich states to promote the mining, processing and manufacturing of critical minerals. The launch of ISM 2.0 under the Semiconductor Mission will focus on domestic intellectual property, equipment manufacturing and strengthening semiconductor supply chains.

The Electronics Components Manufacturing Scheme allocation has nearly doubled to ₹40,000 crore, supporting the expansion of domestic electronics manufacturing capabilities. These initiatives are aimed at strengthening domestic manufacturing, reducing supply-chain dependence and building capacity in strategically important sectors.

A new ₹10,000 crore SME Growth Fund and a ₹2,000 crore infusion into the Self-Reliant India Fund will provide additional risk capital to small and micro enterprises. In addition, a ₹10,000 crore Container Manufacturing Scheme over five years aims to establish a globally competitive domestic ecosystem for shipping container production.